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Commodities fuelling hedge fund returns

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8 Apr 2022

Hedge funds have endured a difficult start to the year, but there are rays of light. Andrew Holt reports.

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Hedge funds have endured a difficult start to the year, but there are rays of light. Andrew Holt reports.

Commodities_mining

Given the multi-faceted and frenetic picture of what is happening in commodities, it is unsurprising that hedge funds focused on the asset class were the strongest performers in February, with an aggregate return of +4.32%.

They also take first place in the year to date at +8.55%. This followed a strong 2021, where commodity-focused hedge funds were among the highest yielders with an aggregate return of +20.87%, according to eVestment.

This is within the context of the S&P500 Energy index having outperformed the broader S&P500 by the largest margin on record, according to Dow Jones Market Data.

Market trends

Other hedge funds have also benefited. Managed futures, which use algorithms to exploit market trends across a range of asset classes, were strong performers in February, with aggregate returns of +2.39%, bringing the total to

+3.58% since the start of January. Macro hedge funds were also solid performers in February returning +1.76%, slightly ahead of the +1.47% they made a month earlier. The 2.77% earned in the opening two months of the year is a strong turnaround for these funds, which returned an average of just +2.45% in 2021.

At the other end of the spectrum, origination and financing hedge funds were the worst performers among primary strategies, coming in at -4.54%. This helped their aggregate returns to end the first two months of the year at -6.81%.

Interestingly, equity-focused funds have had something of a rough start to the year, too. Among the primary hedge fund markets, they came bottom of the performance table at -1.08%, with performance so far in 2022 at -4.32%.

Looking at the data overall, only about a third of hedge funds are producing positive results so far this year, although industry performance relative to broader equity or fixed income indices is favourable.

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