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Hedge Fund Industry Loses 4.45% in September, Down 12.02% Year to Date

Equity Market Neutral Traders the Sole Profitable Subsector in September


As markets took a battering worldwide in September, the hedge fund industry was not immune, losing -4.45% during the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions.

Once again, however, hedge funds’ performance bettered that of the S&P 500 Total Return Index, which was off -9.21% for the month.

For the year to date, the hedge fund industry was down -12.02% through September, though again outperforming the S&P 500 Total Return Index, which was down -23.87% over the period.

Losses were nearly universal across hedge fund subsectors in September. The lone exception was the Equity Market Neutral Index, which eked out an 11 basis-point return.

Amidst September’s broad selloff, Emerging Market Equity managers absorbed a particularly violent shellacking. As a result, EM sectors dominated the bottom quartile of performance for the month: The Emerging Markets Global Equities Index hemorrhaged -8.66%; the Emerging Markets Asian Equities Index was down -8.08%; the Emerging Markets Asia Index was off -6.98%; the Emerging Markets Global Index slipped -6.80%; and the Emerging Markets Index retreated -6.28%.

After September’s losses, nearly all hedge fund subsectors are underwater for calendar year 2022. The handful of profitable subsectors were led by the Global Macro Index which is up 5.18% on the year. Global Macro’s closest competition has come from the Equity Market Neutral Index which has booked a return of 1.79%. Interestingly, the Emerging Markets Latin American Equities Index has managed to cheat the fate of so many other EM managers in 2022 and has delivered the third-best track record on the year with a 0.94% return. Its cousin, the Emerging Markets Latin American Index brings up the rear with a year-to-date performance one basis point in the black.

Subsectors with the most significant year-to-date losses included the Emerging Markets Eastern European Equities Index, down -32.83%, the Technology Index, off -23.91%, the Emerging Markets Global Equities Index, losing -21.73%, the Emerging Markets Asian Equities Index, retreating -21.03%, and the Healthcare & Biotechnology Index, down -20.52%.

“In its efforts to tamp down persistent inflation, the Fed raised the Federal Funds Rate again in September by 75 basis points, the fifth such rate hike in 2022. Inflation slowed very slightly during the August CPI measurement, but nevertheless remained stubbornly high and continued to degrade the both the mood and purchasing power of global consumers,” reported Ben Crawford, Head of Research at BarclayHedge. “As if on cue, global stock markets hit a two-year low during the month while the Dow suffered its worst month since March 2020. Against that backdrop, nearly all hedge fund subsectors also bled out during September. While it is undoubtedly cold comfort to hedge fund investors who have faced average losses of -12% in 2022, the industry is providing a net-of-fees shield against broad equity indices whose losses approach -25% and more on the year.”

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

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Malea Lydon

BackBay Communications