Macro hedge funds surged in September, with strong contributions from currency and fixed income exposures as the US dollar extended record gains, the Federal Reserve increased interest rates in an effort to slow generational inflation, and US equities posted steep, broad-based declines.
The investable HFRI 500 Fund Weighted Composite Index fell -1.5 per cent for the month, though topped declines in US equities by over 700 basis points, as strong Macro performance was offset by declines across Equity Hedge, Event-Driven, and Relative Value strategies, according to data released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry. The HFRI Fund Weighted Composite Index declined -2.3 per cent in September, while the HFRI Asset Weighted Index advanced +1.1 per cent for the month, increasing the YTD return to +3.8 per cent.
The dispersion of hedge fund performance widened in September, as the top decile of the HFRI constituents advanced by an average of +6.4 per cent, while the bottom decile fell by an average of -14.3 per cent, representing a top/bottom dispersion of 20.7 per cent. By comparison, the top/bottom dispersion was only 14.5 per cent in August. Through the first nine months of the year, the top decile of the HFRI has surged an average of +38.0 per cent, while the bottom decile has declined by an average of -35.3 per cent, representing a top/bottom dispersion of 73.3 per cent. Approximately one-quarter of hedge funds posted positive performance in September.
Macro strategies accelerated strong YTD performance as the US dollar surged, with the British Pound falling below a historic low of 1.04 against the US dollar, while equity market posted steep declines, the Fed raised interest rates and volatility surged, with performance led by Quantitative, trend-following CTA strategies and Currency-focused exposures. Led by the HFRI 500 Macro: Systematic Diversified Index, which surged +4.4 per cent in September, the investable HFRI 500 Macro Index jumped +2.75 per cent for the month, extending YTD performance to +17.45 per cent, leading all strategy indices. The HFRI Macro (Total) Index also added +1.7 per cent in September, led by the HFRI Macro: Currency Index, which advanced +2.3 per cent for the month. Through the first three quarters of 2022, Macro sub-strategy gains have been led by the HFRI 500 Macro: Commodity Index, which has surged +43.9 per cent, and the HFRI 500 Macro Systematic Diversified Index, which has jumped +22.7 per cent.
Fixed income-based, interest rate-sensitive strategies posted mixed performance for September, with gains in Volatility exposures offset by declines in Yield Alternatives, as the Federal Reserve continued to raise interest rates to slow generational inflation; the HFRI Relative Value (Total) Index declined -1.4 per cent for the month, while the investable HFRI 500 Relative Value Index fell -1.05 per cent. The HFRI 500 RV: Volatility Index gained +1.5 per cent for the month, while the HFRI RV: Yield Alternative Index fell -8.6 per cent.
Event-Driven strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, posted declines in September as the HFRI Event-Driven (Total) Index fell -4.0 per cent, while the investable HFRI 500 Event-Driven Index fell -3.4 per cent for the month. ED sub-strategy declines were driven by the HFRI 500 ED: Multi-Strategy Index, which declined -6.55 per cent for the month, and the HFRI 500 ED: Distressed Index, which fell -6.5 per cent.
Equity Hedge funds, which invest long and short across specialised sub-strategies, also posted declines in September as equity markets fell sharply, with the investable HFRI 500 Equity Hedge Index falling -4.45 per cent, while the HFRI Equity Hedge (Total) Index posted a decline of -4.2 per cent. EH sub-strategy declines were led by the HFRI 500 EH: Fundamental Growth Index, which fell -5.6 per cent for the month, which was partially offset by a gain of +4.3 per cent the HFRI 500 EH: Energy Basic Materials Index.
Liquid Alternative UCITS strategies also mixed performance in September, with the HFRX Absolute Return Index gaining +2.5 per cent, while the HFRX Global Hedge Fund Index fell -0.96 per cent. Strategy performance was led by the HFRX Macro Index, which jumped +3.0 per cent for the month with strong contributions from the HFRX Macro: Systematic Diversified/CTA Index, which surged +6.5 per cent. The HFRI Diversity Index declined -3.8 per cent in September, while the HFRI Women Index fell -3.5 per cent.
