Hedge Fund Data

Monthly hedge fund performance review – October 2022

21/11/2022
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Hedge fund performance was largely positive in October. Strategies with a higher beta to equities outperformed other strategies, as most equity markets staged a recovery in October. Despite October’s recovery, year-to-date returns remain negative in almost all equity markets. Government bond yields fell in most major markets, with the exception of the US and Germany. Hedge fund performance dispersion was similar to September.

HEDGE FUNDS
Hedge fund compositeHedge fund returns were generally positive in October. The average hedge fund net return across all strategies was 0.82%. All strategies, except two, had positive performance. Strategies with a higher beta to equities outperformed. October’s performance dispersion was similar to September’s.
Long biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 2.55% in October, the strongest performing strategy during the month. It remains the weakest performing strategy year-to-date. The best performing sub-strategy was long biased – commodities, which was up 2.68%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned -0.13% on average in October. Quant remains the strongest performing strategy year-to-date, where it is up 12.16%. Sub-strategy performance varied, ranging from quant macro– down 3.89% to risk premia up 4.34%.
Equity long/shortEquity long/short funds returned an average of 1.32% in October. Equity long/short is the second weakest master strategy monitored by Aurum’s Hedge Fund Data Engine year-to-date. Most sub-strategies had positive performance, with the notable exception of Asia Pacific long/short, which struggled amidst weakness in Chinese and Hong Kong equities.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 0.89% in October. All sub-strategy returns were positive. Fixed income relative value was the strongest performing sub-strategy. Despite positive returns in October, macro emerging markets was the weakest performing sub-strategy, and is the only sub-strategy with negative returns year-to-date.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.44% in October. It is the second-strongest performing strategy group year-to-date. Smaller funds, with an AUM of under $0.5bn, performed more strongly than larger counterparts.

MARKETS
Major eventsOctober was a news-heavy month. The run-up to the US midterms; the appointment of a new Chancellor of the Exchequer and Prime Minister in the UK; further COVID lockdowns in China; Xi Jinping’s historic third term as the General Secretary of the Chinese Communist Party; and escalations in the Russian invasion of Ukraine created a febrile geopolitical climate. Despite this, equity markets generally rebounded, supported by some strong corporate earnings and expectations that the Fed will slow the pace of rate hikes.
EquitiesEuropean and US markets staged a material recovery in October, although remain firmly in the red year-to-date. Positive European earnings reports, and speculation that the pace of Fed rate hikes will slow soon boosted sentiment. Chinese equities notably underperformed, impacted by bearish market responses to Xi Jinping’s re-appointment as General Secretary of the Chinese Communist Party and continuing COVID-related lockdowns.
Government bondsUS Treasury yields rose in October. The 3m/10y yield curve inverted, reflective of market expectations of an impending recession. In the UK, the appointment of Jeremy Hunt as Chancellor and the subsequent elevation of Rishi Sunak to the role of Prime Minister were well received by markets; gilt yields fell significantly by month-end. Peripheral European bond yields fell by more than core European.
Corporate bondsCorporate bond performance was mixed in October. All major credit indices have negative performance year-to-date. US high yield bonds outperformed investment grade. Emerging market corporate bonds were the worst performers during the month.
CurrenciesThe US dollar weakened in October, ending a four-month run of gains, and reflecting shifting market sentiment on the pace of future Fed rate hikes. As the volatile political situation in the UK calmed, so too did sterling, which ended the month up. Similarly, in Brazil, the real appreciated following the presidential election. The Japanese yen continued to weaken as a consequence of the Bank of Japan’s commitment to super-dovish policies.
CommoditiesOil prices increased as Saudi Arabia cut production and concerns with US storage shortages grew. Mild weather in Europe and excess supply in the US caused gas prices to fall. As markets became more “risk-on”, gold prices fell.

The Hedge Fund Data Engine is a proprietary database maintained by Aurum Research Limited (“ARL”).  For information on index methodology, weighting and composition please refer to https://www.aurum.com/aurum-strategy-engine/. For definitions on how the Strategies and Sub-Strategies are defined please refer to https://www.aurum.com/hedge-fund-strategy-definitions/

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