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Hedge Funds Outperform S&P 500 in Both December and Calendar Year 2022

The Industry Has Lagged the Index Since the Onset of the Great Recession in 2008


As recession fears continued to pull equity markets down in December, the hedge fund industry posted its own – if smaller – monthly loss, down -1.68% for the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions.

By comparison, the S&P 500 Total Return Index was off -5.76% for December.

The hedge fund industry fared better than the S&P 500 Total Return Index for the year as well, losing -8.59% over the 12 months while the S&P 500 Total Return Index fell -18.14%. The industry’s 9.45% outperformance in 2022 marks the first instance in more than 14 years where hedge funds have outperformed the index in a calendar year.

“While many investors and money managers will be eager to put 2022 behind them, the year was too painful to be easily forgotten. It was the year the so-called ‘everything bubble’ imploded. As downturns go, it was unique in how few ‘safe havens’ it left unbreeched,” reflected Ben Crawford, Head of Research at BarclayHedge. “In terms of severity, for the S&P500, MSCI World Index, the NASDAQ Composite and the FTSE NAREIT U.S. Real Estate Index you have to go back to the crisis era of 2008 to find more pain than we endured in 2022—save for the J.P Morgan Global Government Bond Index, which lost -13.01% in 2022, for which there is no precedent in its track record spanning back to 1985. Meanwhile, hedge funds emerged as one of the few seawalls not to founder under the fury of the storm.”

While nearly two-thirds of hedge fund subsectors tracked were in the red in December, the month did see a number of gainers. Chief among them was the Emerging Markets Eastern European Equities Index which picked up a tidy return of 3.65%. It was followed by two subsectors with nearly identical results: Convertible Arbitrage Index up 1.51% and the Option Strategies Index with 1.50%. Emerging and frontier markets enjoyed some bounce-back to end 2022, as the Emerging Markets Sub Saharan Africa Index showed a 1.43% return and the Emerging Markets Global Fixed Income Index was up 1.27%. The Fixed Income Arbitrage Index was very close in tow with a 1.25% result on the month.

The beatings continued in December for equity markets and particularly technology-focused investments. The Technology Index was beaten down an additional -5.16% to end the year. It was followed by the Pacific Rim Equities Index, off -3.88%; the Equity Long Bias Index losing -2.55%; Balanced (Stocks & Bonds) Index down -2.44%; the Emerging Markets Latin American Equities Index slipping -2.26%; and the Fund of Funds Index dropping -2.13%.

Most hedge fund subsectors posted losses for 2022 as well, though again, there were several that found their way to positive territory. The Global Macro Index fared best overall with a 6.22% compounded return for 2022. Global Macro was rivaled by managers in Latin America who manufactured an impressive rebound through turbulent conditions.  The Emerging Markets Latin America Index ended the year up 4.95% and the Emerging Markets Latin American Equities Index was ahead 3.58%. Market Neutral players cobbled together net gains through much of 2022, leading the Equity Market Neutral Index to finish ahead 2.64%.  In sub-Saharan Africa, savvy hedge funds found ways to come out ahead, as evidenced by the Emerging Markets Sub Saharan Africa Index finishing the year 2.41% in the black. Equity managers in Europe managed to buck the trend that dogged most major-market equity players as the European Equities Index reported a calendar year return of 1.78%. Finally, Merger Arb funds, which enjoyed good favor with investors throughout 2022, managed to eke out a modest return as the Merger Arbitrage Index ended up 0.68%.

Slightly more than three out of four hedge fund subsectors lost money in 2022. Subsectors posting the largest 2022 losses included the Technology Index, down -25.64%, the Emerging Markets Eastern European Equities Index, losing -24.74%, the Emerging Markets Asian Equities Index, retreating -17.74%, the Healthcare & Biotechnology Index, off -17.16%, and the Emerging Markets Global Equities Index, down -17.04%.

For a complete table of BarclayHedge Hedge Fund and Sub-Index results for December, as well as historical returns, click here.


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Malea Lydon

BackBay Communications