Hedge funds largely protected investors from the equity market turmoil in August, posting flat returns of 0.02% during a volatile month that saw the S&P 500 decline 4.2%. Despite the relative outperformance, hedge fund industry AuM declined for the fifth consecutive month in August, falling $18.5bn, which extended the YTD decline to $146bn. North America accounted for the lion’s share of AuM decline as the region recorded net outflows of $10.1bn, driven by rising risk-off sentiment as inflation has remained rapid at 8.3% in August
despite the Federal Reserve’s aggressive tightening.
The Eurekahedge Hedge Fund Index gained 0.04% in August, a second consecutive month of positive returns following a 1.5% gain in July, even as the broader markets continued to plummet, as reflected in the 4.2% decline of the S&P 500. Hopes for a dovish pivot in monetary policy in early 2023 were dashed after Federal Reserve chair Jerome Powell reiterated the need to maintain tight monetary policy and avoid loosening policy too early as inflation remained stubbornly high at 8.3% in August.
The first eight months of 2022 have been characterized by a turbulent market environment, with rising recession concerns amid multi-decade high inflation and central bank hawkishness weighing down on global bonds and equities. The S&P 500 and NASDAQ Composite have fallen 17.0% and 24.5%, respectively, marking their worst performance since the 2008 global financial crisis. Against this backdrop, the average macro hedge fund (0.2%) and billion-dollar macro fund (10.9%) have performed well, outperforming all other hedge fund strategies tracked by With Intelligence, with the exception of CTA/managed futures (7.1%).
The onset of the pandemic in early 2020 had a severe socio-economic impact on Latin America, with GDP declining by 6.8% in 2020 as governments implemented social distancing and other mitigation measures to reduce the spread of the virus. AuM of Latin American hedge funds were severely impacted, falling by $8.6bn in Q1 2020 as riskaverse investors sought to preserve their capital. Governments in the region reacted swiftly, targeting fiscal policy action to protect the most vulnerable groups and working in tandem with central banks to ease monetary conditions to support economic activity.