Overall, hedge funds fell 4.25% last year, according to the HFRI 500 Weighted Composite Fund Index, which tracks many of the world’s top hedge fund performers.
Equity hedge funds had the worst performance in 2022 among the four major hedge fund categories tracked by HFR. Yet their 10.37% loss still managed to beat the S&P 500, which fell 19.4% in its worst year since 2008.
Event-driven hedge funds, including those that bet on corporate mergers or restructurings, and relative value funds, which trade in asset price dislocations, also ended the year with losses of 5.04% and 0.9%, respectively.
Crypto hedge funds fell 55.08%, after posting positive returns in just three months of the year. Despite their massive losses, crypto hedge funds only represent a tiny fraction of the industry’s $3.8 trillion in assets.
While equity and crypto portfolio managers faced challenges last year, hedge fund investors found bright spots for yield. Macro hedge funds outperformed the sector, HFR showed. The HFRI macro index rose 9.31%, mainly driven by commodities, quantitative and trend-following strategies, the data provider said.
“Investors need to look below the surface to understand how the industry performed last year. Long-short hedge funds are the largest asset-weighted portion of the industry,” said Patrick Ghali, managing partner at hedge fund advisory firm Sussex Partners. “Overall, I think it’s been a good year for hedge funds.”
Macro hedge funds trade a wide range of assets globally, such as bonds, currencies, rates, stocks and commodities. This allowed them to intelligently place their bets against the backdrop of asset price dispersion caused by rising interest rates and soaring inflation.
Reuters reported earlier this year that investors believe macro hedge funds are likely to outperform the sector again this year as a volatile environment for markets persists.
Last year’s turmoil also proved beneficial for multi-strategy hedge funds, which are allowed to trade across different assets and markets. Kenneth Griffin’s Citadel posted gains of 38.1% in its flagship fund Wellington, while DE Shaw’s Composite Fund was up 24.7% and Millennium was up 12.4%.
(Reporting by Carolina Mandl, New York; Editing by Chris Reese and Lincoln Feast.)
By Caroline Mandl