Despite strong industry performance this year, a significant portion of hedge funds have yet to fully recover from the steep losses experienced in 2022, according to a report by Institutional Investor.

The report cites a new study by Goldman Sachs examining the current state of the industry as revealing that while the hedge fund sector overall has posted its best half-year performance in three years, about a third of funds remain below their previous high-water marks.

The 2022 downturn, driven largely by the collapse of the technology sector, inflicted severe double-digit losses on many hedge funds. Among the hardest hit was Tiger Global, which saw its long-short equity hedge fund plunge more than 50%. Recovering from such a loss is no small feat—hedge funds need to double their returns just to break even and start charging full performance fees again.

Tiger Global's bug decline followed a 7% fall in 2021, and while the fund managed a 28.5% gain last year and was up 10.7% through July of this year, its still has a considerable way to go before reaching its high-water mark.

Goldman’s report highlights that a third of long-short equity funds have not yet returned to their previous peaks, although this is an improvement from the end of 2023, when 45% of such funds were still underwater. On average, these funds need to achieve a 20.2% gain to recover fully. Within the long-short equity strategy, healthcare-focused funds are among the hardest hit, requiring an average gain of over 41% to reach their high-water marks, according to Goldman.

Another notable casualty from 2022 was Whale Rock, led by Alex Sacerdote, which lost 45% over the year on the back of a 9% drop in 2021. Despite a solid recovery in 2023, with an 18.9% gain through May and 18% for the entire year, Whale Rock has still not fully recovered.

One fund that has fared better is Philippe Laffont’s Coatue Capital Management's which, following a 19% loss in 2022, posted a 21.5% gain in 2023. Having still been below its high-water mark at the end of last year, a 5.66% gain through July this year likely puts Coatue back in the black.

Event-driven hedge funds were also heavily impacted, with 31% still below their high-water marks. However, Goldman notes that these funds, on average, only need to achieve a 6.9% gain to fully recover.

A prominent exception is Dan Loeb’s Third Point Investors, which lost 21.8% in 2022 and only managed a 4.1% gain last year. This year, the fund is up 10.9% through July but still has some way to go before it can make its investors whole.

Macro funds are facing the most significant challenges, with 45% of discretionary macro funds and 47% of CTAs and systemic macro funds still below their high-water marks by the end of the first half of 2024. Discretionary macros need to make 15.9% to recover, while CTAs and systemic macro funds require a 9.3% gain, according to the report.

Multistrategy funds are faring better, with only 13% below their high-water marks. On average, these funds need just a 4% return to fully recover.