Hedge funds are suffering from the second worst year of performance on record, after only the Financial Crisis year of 2008. Leading the losses are funds with Long-short positions. Laurence Fletcher reports in the Financial Times, writing:
Hedge funds are heading for one of their worst years of performance on record, leaving investors frustrated with how many managers have failed to offset sharp falls in equity and bond markets.
Funds were down 5.6 per cent on average in the first six months of 2022, according to HFR. While a narrower HFR daily index of performance shows them clawing back around 0.5 per cent last month, the industry is nevertheless on track for its second-worst year of returns since 1990, when the data provider’s records begin — beaten only by steep losses during the 2008 global financial crisis.
Much of the pain has been concentrated in so-called long-short equity funds, which manage around $1.2tn in assets and which bet on rising and falling stock prices. They dropped 12 per cent on average in the first half of the year, according to HFR. The group was expected to have gained only around 1 per cent in July, according to an estimate by JPMorgan head of positioning intelligence John Schlegel, a much shallower rebound than the 7 per cent rally last month for global equities.
“Clearly, in long-short equity it’s been a complete disaster,” said Scott Wilson, chief investment officer of the endowment fund at the Washington University in St Louis, Missouri, adding that some funds had given up years of gains in this year’s sell-off. He said it had been a “rough year” for funds that had bet on the fast-growing companies that were in vogue at the height of the pandemic but have pulled back sharply in 2022.
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