Global hedge funds recorded a 2.8% gain in January, but expectations of a continued bear market meant industry performance lagged broader stock market indices over the month, according to the latest performance data from HFR.
All four major hedge fund strategies ended the month higher, led by equity hedge funds with a 4.24% gain, a notable turnaround for a category that posted major losses in 2022.
By comparison, the Nasdaq recorded its best January performance since 2011 with a 10.7% gain, while the S&P 500 advanced 6.18% over the month.
The investable HFRI 500 Fund Weighted Composite Index jumped +2.5% in January, led by directional Equity Hedge and Event Driven strategies.
As investors positioned for an active uptick in M&A in 2023, Event-Driven strategies, which often focus on out-of-favour, deep value equity exposures and speculation on M&A situations, also drove industry-wide gains in January, with the investable HFRI 500 Event-Driven Index surging +3.8%, while the HFRI Event-Driven (Total) Index jumped +3.55%. Event Driven sub-strategy performance was led by the HFRI 500 ED: Distressed/Restructuring Index, which surged +6.5% for the month, while the HFRI 500 ED: Activist Index jumped +5.4%, and the HFRI 500 ED: Special Situations Index gained +5.0%.
Fixed income-based, interest rate-sensitive strategies also advanced in January, as investors positioned for a moderation of inflationary pressures and interest rate increases; the investable HFRI 500 Relative Value Index advanced +1.7% for the month, while the HFRI Relative Value (Total) Index gained +1.95%. Leading sub-strategy performance, the HFRI 500 RV: Fixed Income-Asset Backed Index surged +4.2% in January, while the HFRI 500 RV: Multi-Strategy Index jumped +2.8%, and the HFRI 500 RV: FI-Corporate Index added +2.25%.
Macro strategies generated mixed performance to begin 2023, with the investable HFRI 500 Macro Index posting a narrow decline of -0.17% for the month after jumping +14.35% in 2022, while the HFRI Macro (Total) Index advanced +0.3% in January. Declines in quantitative, trend-following CTA strategies offset gains in Fundamental Discretionary Macro, with the HFRI 500 Trend Following Index falling -0.6%, while the HFRI 500 Macro: Discretionary Thematic Index gained +1.8%.
The HFR Cryptocurrency Index vaulted +27.3% in January, paring the 2022 performance decline of -54.0%, as cryptocurrency values leapt for the month while realised volatility remained elevated. The HFR Risk Parity Index also surged in January with the HFR Risk Parity Vol 15 Index gaining +8.3%, also paring the 2022 decline of -30.75%.
Liquid Alternative UCITS strategies advanced in January, with the HFRX Market Directional Index surging +3.5%, while the HFRX Global Hedge Find Index gained +1.67%. HFRX sub-strategy performance was led by the HFRX Event Driven Index and the HFRX Relative Value Index, both of which gained +2.3% for the month. The HFRI Diversity Index surged +4.8% in January, while the HFRI Women Index jumped +2.75%.
