New data reveals extent of Covid-19’s impact on hedge fund performance

Market losses

Hedge fund strategies of all stripes have posted sizeable losses so far this month as fears over the coronavirus outbreak ripped through global markets, new data from Hedge Fund Research shows.

The HFRX Global Hedge Fund Index, which takes the temperature of the overall global hedge fund industry, has lost 7.76 per cent so far in March.

The index, which comprises performance of all eligible hedge fund strategies within four principal strategies (equity hedge, event driven, macro/CTA, and relative value arbitrage), is now down 8.72 per cent since the start of 2020, according to HFR data.

Global equities posted steep losses in recent weeks, with many indices falling into bear market territory by eclipsing 20 per cent corrections, as volatility soared as a result of the coronavirus contagion. As a result, long/short equity-focused hedge funds are down more than 12 per cent month-to-date, and 15 per cent for the year, according to HFR’s returns.

Interest rates have dropped to record lows as central banks globally cut rates and kicked off the biggest round of quantitative easing since 2008. At the same time, commodities prices were shredded in a pincer movement comprising sliding demand for oil on one side, and a spat over output among Opec members, HFR said in a note on Thursday. 

The HFRX Emerging Markets Composite Index shed more than 18 per cent month-to-date, with EM-focused strategies falling more than 22 per cent since the start of 2020.

Meanwhile, event driven-focused strategies gave back around 7 per cent during March, and have lost a similar amount on a year-to-date basis. Similarly, merger arbitrage funds have lost more than 9 per cent in March, and are also down 9 per cent for the year.

The Macro/CTA Index posted a decline of 1.30 per cent month-to-date, losing 1.67 per cent since the start of January.

Despite the almost across-the-board falls, there were pockets of gains, notably in systematic quantitative macro strategies.

The Systematic Diversified CTA Index – which tracks the performance of computer-driven macro funds that trade movements in underlying economic variables and their impact on equities, currencies and commodities - added 1.26 per cent during the first half of the month. The index also remains slightly positive for the year, up 0.93 per cent since the start of January.