Hedge funds surged in November, driven by the US Presidential election results, as managers and investors positioned for an active M&A cycle and more business-friendly policies from the incoming administration, according to HFR.
The HFRI Fund Weighted Composite Index (FWC) surged +2.6% in November, while the HFRI Asset Weighted Composite Index jumped +2.1% for the month. Strategy gains were led by Equity Hedge and Directional Event Driven exposures, with each of these posting the strongest monthly gain for 2024.
The recently launched HFRI Multi-Manager/Pod Shop Index gained +2.6% for the month as managers positioned for the policies of the incoming administration across all sectors including energy, import, technology, and financials. The HFR Cryptocurrency Index also surged +46.0% on favourable outlook for cryptocurrency by the incoming Trump administration, vaulting its YTD return to +76.2% through November.
Hedge fund performance dispersion expanded in November, as the top decile of the HFRI FWC constituents advanced by an average of +12.3%, while the bottom decile fell by an average of -4.9%, representing a top/bottom dispersion of 17.2% for the month. By comparison, the top/bottom performance dispersion in October was 11.6%. In the trailing 12 months ending November 2024, the top decile of FWC constituents gained +45.3%, while the bottom decile declined -10.9%, representing a top/bottom dispersion of 56.3%. Approximately 75% of hedge funds produced positive performance in November.
Equity Hedge (EH) funds, which invest long and short across specialised sub-strategies, jumped in November with the HFRI Equity Hedge (Total) Index advancing an estimated +3.4% for the month to bring the YTD return to +13.4%, which leads all main strategy indices YTD 2024. EH sub-strategy gains were led by the HFRI EH: Technology Index which surged +6.7% for the month, the strongest monthly return since inception. The HFRI EH: Quantitative Directional Index jumped +6.1% for the month and is the leading area of sub-strategy performance YTD 2024, vaulting +21.5% through November.
Event-Driven (ED) strategies, which often focus on out-of-favour, deep value equity exposures and speculation on M&A situations, surged in November on the US election results and expectations for strong M&A cycle into 2025. The HFRI Event-Driven (Total) Index jumped +3.3%, the strongest monthly gains for 2024. ED sub-strategy gains were led by the HFRI ED: Activist Index, which vaulted +4.85%, while the HFRI ED: Multi-Strategy Index jumped +4.5% for the month. Other ED sub-strategies posting strong gains included HFRI ED: Special Situations Index and HFRI ED: Distressed Index, with these advancing +3.4 and +2.9%, respectively.
Macro strategies also advanced in November, reversing prior month declines as US interest rates traded in a wide range and managers positioned for the policy changes for the incoming Trump administration. The HFRI Macro (Total) Index advanced +1.9% in November, the strongest monthly gain since March 2024. Macro sub-strategy gains were led by the HFRI Macro: Active Trading Index, which jumped +2.7%, the HFRI Macro: Multi-Strategy Index, which advanced +2.35%, and the HFRI Macro: Systematic Diversified Index, which added +2.3%.
Fixed income-based, interest rate-sensitive strategies produced another steady gain in November, with the HFRI Relative Value (Total) Index adding an estimated +1.05% for the month to notch its 13th consecutive monthly gain and 25th gain in last 28 months. RVA strategy performance was led by the HFRI RV: FI-Sovereign Index, which advanced +2.1% for the month, followed closely by the HFRI RV: FI-Multi Strategy Index, which added +2.0%. The HFRI RV: FI-Convertible Arbitrage Index leads all RVA sub-strategies for 2024 with a gain of +10.8%.
Liquid Alternative UCITS strategies also gained in November, as the HFRX Market Directional Index advanced +1.8% while the HFRX Global Hedge Fund Index added +0.8%. Strategy gains were led by the HFRX Macro Index, which gained +1.5%, and the HFRX Equity Hedge Index, which added +1.3%.
“Hedge funds surged in November in response to the US Presidential election results, with managers positioning favourably for the incoming Trump administration with expectations for a stronger economy, lower taxes, a more business-friendly regulatory environment, and a strong M&A cycle, with broad-based monthly gains led by Cryptocurrency, and directional Event Driven and Equity Hedge exposures,” stated Kenneth J Heinz, President of HFR. “With clarity on the US election, expectations for falling geopolitical risk and incoming administration stated policy priorities to continue to lower inflation, expectations for hedge fund industry performance and asset growth in 2025 are likely to continue to increase as investors position for acceleration of the powerful risk on sentiment that dominated November.
“Despite enthusiasm for the continuation of this powerful trend, managers are also likely to position for unexpected volatility and dislocations as new policies impact global trade and commerce. Institutions looking to access these powerful, specialised trends while also maintaining opportunistic, defensive portfolio positioning are likely to increase exposure to funds which have demonstrated their strategy’s effectiveness and robustness over the past few years.”
