Hedge funds ended a strong year in terms of returns
In an overall strong year in terms of returns, cryptocurrency-focused funds turned the lights off with astonishing return numbers.
Hedge funds rose in December to post double-digit percentage gains for 2021, strengthening the position of an industry that did not always thrive in the aftermath of the 2008 financial crisis, according to figures from Hedge Fund Research, based in Chicago.
The HFRI 500 Fund Weighted Composite investable index gained 0.9% in December, reversing the decline of the previous month, while the HFRI Fund Weighted CompositeÂ® (FWC) index rose 1.3%. For the full year, the HFRI FWC gained 10.3 percent, slightly behind the 11.8 percent gain of the previous year, but marking the third highest performance of the calendar year since 2009.
One notable segment was hedge funds investing in cryptocurrencies; they led all strategies last year, and the HFR Cryptocurrency index climbed 215%, beating the 193% return in 2020, HFR said.
Equity hedge funds, which invest long- and short-term in specialized sub-strategies, led the industry’s strategy gains in December and reversed the previous month’s decline as global stocks traded in a wide intra-month range but recovering from an intra-month drop motivated by fears of the spread of the Omicron coronavirus variant.
âSince and including the historic stock market collapse since the onset of the global pandemic, equity-focused hedge fund strategies have significantly outperformed US stocks (as represented by the DJIA) by more than 200 basis points and l ‘did with a third less volatility,’ said Kenneth J Heinz, president of HFR. âIn 2022, hedge fund managers are positioning themselves for continued volatility associated with the global pandemic, but are also tactically focusing on preserving capital in equity, fixed income and commodity markets, given the the powerful dynamics of rising interest rates and record inflation. â
The investable HFRI 500 Equity Hedge index gained 1.7% for the month, bringing the performance for the year 2021 to 11.9%, while the HFRI Equity Hedge (Total) index rose 1.85% , driven by gains from exposures to health care and core values. . The HFRI EH: Healthcare Index jumped 3.9% while the HFRI Fundamental Value Index rose 2.4% for the month. For 2021 as a whole, EH performance was led by the HFRI EH: Energy / Basic Materials index, which jumped 26.2%.
Event strategies, which often focus exposure to value stocks and speculation in M&A situations, also gained in December, led by activist strategies and special situations. The investable HFRI 500 Event-Driven Index gained 1.3%, while the HFRI Event-Driven (Total) index rose 1.8% for the month, bringing the year 2021 performance to 13, 1%, the highest performance since 2009.
Fixed income and interest rate sensitive strategies also advanced during the month, as interest rates increased and managers continued to position themselves for short-term reduction in bond purchases. by the US Federal Reserve. Macro strategies advanced as commodities gained momentum as interest rates continued to rise.
The dispersion in the performance of the underlying constituents of the HFRI index narrowed in December, with the top decile of the HFRI gaining an average of 6.6%, while the bottom decile fell an average of 3.5% over the month, which is 10.1 percent lower for the month, much narrower than the 19.1 percent spread in November.