An overwhelming majority of macro hedge funds and trend-following managers are upbeat on their performance prospects for the rest of the year – but confidence among equity-focused firms has plummeted following 2022’s stock market upheaval.
- Trend-followers and macro funds lead the hedge fund pack this year as equity strategies sink
- New Hedgeweek report shows 95% of macro and CTA managers are positive on their H2 performance prospects
- But a quarter of long/short equity funds are pessimistic on H2, as investors seek out portfolio protection amid tumbling asset classes
An overwhelming majority of macro hedge funds and trend-following managers are upbeat on their performance prospects for the rest of the year – but confidence among equity-focused firms has plummeted following 2022’s stock market upheaval.
Hedgeweek’s latest Insight Report, H1 Update: Hedge funds traverse 2022’s economic turmoil, shows that 95% of macro and managed futures firms – which outflanked other hedge fund sub-strategies during H1 – believe they can continue to capitalise on this year’s economic turbulence.
In contrast, only 58% of equity long/short managers are similarly optimistic – with roughly a quarter of equity managers now taking a negative stance on their H2 prospects, according to the manager survey conducted for the report.
CTAs and trend-following strategies – which typically use computer-based models to trade on directional signals and themes across a range of assets and markets – successfully seized on strong trends in H1, namely the strengthening dollar, rising commodities and falling equity and bond markets.
Société Générale’s main CTA index – a key industry barometer which tracks the daily performance of 20 of the largest managed futures hedge funds’ returns – advanced more than 21% in H1, its best start to the year since the benchmark launched in 2000.
Macro hedge funds – which trade geopolitical and macroeconomic events using equities, currencies, commodities, futures and more – also profited from the first half upheaval, which was fueled by soaring energy prices and surging inflation.
By comparison, long/short equity – the biggest and most-established segment of the hedge fund sector, and often seen as the cornerstone strategy of the industry – ended the first-half in the red after stock markets suffered historic slides.
With macro and CTA managers’ optimism holding up at 2022’s midway point, industry attention is now turning to how allocators will look to rotate their portfolios in order to weather the coming economic storm.
Dave McMillan, CIO, hedge funds, at Mercer, notes that trend following strategies have delivered “very strong returns” for investors, while “long/short equities have been the most challenged.”
“If you look at sentiment towards global macro, it’s improved from a few years ago when equities were doing well and global macro was being somewhat ignored,” adds Peter Kisler, portfolio manager at Trium Capital.
“Now that equities are doing poorly, investors are looking for strategies that can make you money quickly, that can make you money in an environment where, like this year, most asset classes have fallen.”
Key implications | Investors and hedge fund managers: As the prospect of recession and market volatility heightens, allocators are looking to insulate their portfolios following first-half equity market losses. Hedge funds running CTA and macro-focused strategies stand to gain from this sentiment, and are upbeat on their H2 performance prospects.
