Hedge Fund Data
Monthly hedge fund performance review – September 2023
23/10/2023
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Hedge fund industry performance was moderately positive in September; the average hedge fund return across all strategies was 0.08% (asset weighted net return). Most hedge fund strategy groups had positive asset weighted average returns. Strategies with a lower beta to equities outperformed. September was the worst month for equities year-to-date, as the markets grappled with the probability that interest rates will remain elevated for longer than previously expected. Hedge fund performance dispersion was similar to that observed in August.
| HEDGE FUNDS | ||
|---|---|---|
| Hedge fund composite |  | Hedge fund performance was moderately positive in September; the average hedge fund net return across all strategies was 0.08%. The strongest performing strategy during the month was quant. Most underlying strategies had positive average net asset weighted returns, with the exception of strategies with a higher beta to equities. Hedge fund performance dispersion was similar to that observed in August. |
| Long-biased |  | Long biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -3.05% in September, the weakest-performing strategy for a second month. Sub-strategy returns were mostly negative, but the exception was long biased – commodities, up 0.19%. The worst-performing sub-strategy was long biased – equity, down 3.14%. |
| Quant | | Quant funds monitored by Aurum’s Hedge Fund Data Engine returned 2.58% on average in September, the best performing strategy during the month. All sub-strategy returns were positive, with the exception of risk premia. Quant macro/GAA was the best-performing sub-strategy, up 3.34%. |
| Equity long/short | | Equity long/short funds returned an average of -1.57% in September, amidst ongoing weakness in equity markets. Sub-strategy returns were all negative, although there was some dispersion, from fundamental equity market neutral, down 0.18% to US long/short equity, down 2.49%. |
| Macro | | Macro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 0.52% in September. Sub-strategy returns varied, from macro emerging markets, down 1.38% to global macro, up 1.19%. |
| Multi-strategy | | Multi-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 1.14% in September. The largest funds (with an AUM of >$5bn) were the strongest performers. |
| MARKETS | ||
|---|---|---|
| Major events | Following the September meeting of the Fed, the majority of FOMC participants indicated that they expect another interest rate hike before the end of the year. The ECB indicated that a prolonged period of elevated rates may be necessary. Equity markets in particular responded negatively; September was the worst month for global equities year to date. | |
| Equities | | Most major equity indices lost ground in September, the worst month YTD. US equities performed particularly poorly, with the possibility of a US government federal shutdown and the possibility of further rate hikes this year weighing on investor sentiment. Chinese equity weakness persisted amidst wider economic weakness and specific issues in the property and financial sectors. Following losses earlier in the month, European equity indices partially recovered at month-end, as inflation readings declined. |
| Government bonds | | All major economies’ 10-year bond yields increased during September. The US 2/10y yield curve remains inverted, but less acutely than during the summer. US and European yields increased; however European yields fell somewhat at month-end with positive data releases from the ECB. UK bond yields increased after a marginal decrease in UK inflation and the Bank of England’s marginal decision to hold interest rates. |
| Corporate bonds | | Credit indices across the quality spectrum lost ground in September in the broadly risk-off environment. US dollar leveraged loans were the exception, making modest positive gains. Emerging markets and US investment grade credit particularly underperformed. |
| Currencies | The US dollar strengthened against all major currencies in September, benefiting from equity market weakness and the possibility of a longer-than-expected period of elevated interest rates. | |
| Commodities | | Oil prices increased in September, on concerns about supply cuts. Natural gas prices fell on forecasts of a mild US winter. Precious metals prices fell as the US dollar made gains. Most agricultural commodity prices fell. Industrial metals prices generally fell; nickel prices were particularly volatile. |
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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