Hedge funds count the cost of September slide

slowing graph

Hedge funds’ overall momentum in 2021 has been halted, with managers across a range of strategy classes left counting the cost of September’s bumpy equity and credit market reversal, new industry data published this week shows.

On average, hedge fund managers have made gains of more than 8 per cent since the start of this year – but last month’s market turbulence saw most strategy sub-sectors slide into the red, according to separate performance data released by eVestment and BarclayHedge.

Major equity and credit markets endured a “bumpy” September, said Peter Laurelli, eVestment’s global head of research, which took a toll on the broader hedge fund business. 

“This is a dramatic change from August of this year, when more than 67 per cent of funds reported positive returns,” said Laurelli. 

Commodities-focused hedge funds were big performance winners in September, up 1.59 per cent on average, according to eVestment metrics, with their year-to-date returns now standing almost 18 per cent. 

On the flipside, event driven activist strategies suffered the biggest blow, sliding some 2.75 per cent for the month. However, this sub-sector remains up almost 20 per cent for the year, eVestment’s data shows.  

Elsewhere, equity-focused hedge fund managers tumbled 1.35 per cent – with technology, financials and healthcare-focused long/short managers all down - though overall this group remain up for the year at around 10.45 per cent. In contrast, energy-focused equities hedge funds were up 1.85 per cent, and have now advanced 22.45 per cent year-to-date, eVestment said.  

“The dispersion of returns in September was the largest since March of this year, which means there were still many funds within various segments and categories we track that performed well during the month,” Laurelli observed.

Meanwhile, BarclayHedge’s Barclay Hedge Fund Index – which measures the average returns of 1,863 hedge funds in total – remains up 8.74 per cent year-to-date, having retreated 1.22 per cent during the recent turbulence.

“September is historically a slippery period for equity markets, and this year contributed to its lore,” Ben Crawford, head of research at BarclayHedge said of the reversal, which saw 22 of the 30 hedge fund subsectors tracked in the Barclay Hedge Fund Indices slide into the red for the month.

Barclay’s Distressed Securities Index was up 1.91 per cent for the month, while its Emerging Markets Eastern Europe Index advanced 1.23 per cent. Other September gainers included the Emerging Markets Global Fixed Income Index, up 1.09 per cent, the Convertible Arbitrage Index, returning 0.87 per cent, and the Merger Arbitrage Index, gaining 0.35 per cent.

“The industry brought the ‘hedge’ of their namesake and outperformed the S&P 500 index, which posted its worst monthly loss since the start of the pandemic,” Crawford added, noting the S&P 500 Total Return Index’s 4.65 per cent loss in September.

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Hugh Leask
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Editor, Hedgeweek