The 2022 market turmoil caused by geopolitical conflicts and inflation has led to a stark performance bifurcation within the hedge fund industry. While technology and growth-oriented stock funds suffered double-digit losses, macro and quantitative trend-following strategies delivered one of their best quarters ever.
Macro Hedge Funds as Big Winners
Macro hedge funds that bet on commodities, bonds and currencies benefited from the significant volatility and price swings across markets. The HFRI Macro Index surged over 8% in Q1 2022, marking a record quarterly return. Top performers included funds run by Brevan Howard, Systematica and Aspect Capital.
Trend-following Strategies Excel
Many winning funds use algorithms to predict and trade trends across futures and financial markets. With major bond sell-offs as the Fed tightened policy, some made big profits by betting on rising long-term yields.
Equity Funds Suffer in Tech Rout
Equity long/short hedge funds faced difficulties as the tech/growth stock rout hammered consumer discretionary names. While they cut exposure ahead of further market declines, missing the rebound in beaten-down tech names led to a 4% drop in the HFRI Equity Index.
Wide Dispersion of Returns
The top 10% of hedge funds gained 24.3% in Q1 2022 while the bottom 10% lost 15.4%, per data provider HFR. This bifurcation was one of the most severe since the 2008 financial crisis, underscoring winners and losers.
The crisis-driven environment in 2022 has created a huge performance divide in the hedge fund industry. Macro and quantitative funds using economic/market analytics to trade trends are thriving, while equity long/short managers with exposure to struggling stock sectors face difficulties.