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Hedge funds up despite geopolitical and inflationary pressure

Against the backdrop of Russia invasion of Ukraine and rising inflation, hedge funds overall gained 1.48% last month, according to data provider Eurekahedge.

About 61% of funds in the Eurekahedge Hedge Fund Index posted positive returns and 24.2% of managers outperformed the S&P 500, which rose by 3.58% over the same period.

Returns were mixed across geographic mandates. Latin America-focused funds led with a return of 3.87%, while the Asia ex-Japan mandate trailed behind their peers with a negative return of -2.83%.

Across strategies, the CTA/Managed Futures mandate performed best, with a return of 4.76% as funds benefited from higher commodity prices, especially oil. Arbitrage strategies lost -1.43%.

Less than half of all hedge funds (46%) have a positive performance during the first quarter of the year.

European hedge funds in particular are down 3.43% for the year. North American hedge funds, buoyed by stronger US equity performance in March (up 1.28%), are also down for the year (-1.28%).

Fund managers focusing on cryptocurrencies gained 8.81% in March, as Bitcoin was up 24.8% during the month. However, the year-to-date return of the Eurekahedge Crypto-Currency Hedge Fund Index in the first quarter was -9.81%.

Hedge Fund Research (HFR), another data and hedge fund index provider, said global macro hedge funds, which include commodity funds, posted record gains in March.

The investable HFRI 500 Macro Index surged 6.25% in March, extending its first-quarter return to 10%.

Kenneth J. Heinz, president of HFR, said financial market volatility spiked in the first quarter, driven by generational inflation, rising short-term interest rates leading to an inverted yield curve, and the acceleration of the military conflict following the Russian invasion of Ukraine.

“The combination of these two powerful market dynamics of inflation/interest rates and historic geopolitical risk has contributed to massive dislocations across commodity, equity, and fixed income markets and unprecedented macro and geopolitical uncertainty, with managers navigating tremendous and fluid volatility,” he said.

IMS is one of the longest established company management firms in the Cayman Islands. IMS is licensed by the Cayman Islands Monetary Authority to provide independent directors, company management and incorporation, mutual fund administration, captive insurance and trust services. For more information about our services, please contact us.

Disclaimer: this publication does not constitute legal or professional advice and should not be relied on as such.

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