Hedge Funds Weighted Loss of 5.86% in First Half of 2022, Bridgewater Pure Alpha Gained 32.2%

Hedge funds tracked by HFR fund weighted composite index fell 3.08% in June. All main four different hedge fund categories tracked by HFR; equity, event-driven, macro and relative value showed losses last month. This brought losses in 2022 to 5 86% for the half year. Of course, in this period we saw the S&P 500 fall 20.6% through January to June 30, 2022, suffering its worst first half of a year since 1970 when it declined 21.0%. The technology heavy Nasdaq Composite was hit harder, it crashed to its worst first half yearly performance in its existence. as volatility across markets accelerated.

HFR said hedge funds’ performance has diverged a lot this year. Funds in the top decile of the HFRI Fund Weighted Composite Index gained 34.6% on average, while the bottom decile fell 32.2%. Gains, however, were limited to 37% of the funds, HFR added.

“Powerful risk off trends accelerated in June driving extreme financial market volatility with hedge funds trading through a wide range of risks including not only generational inflation, increasing interest rates, the continuation of the Russia/Ukraine war and record energy price increases, but also the increased likelihood of a consumer-led US economic recession,” Kenneth J. Heinz, president of HFR said in a statement.

First Half of 2022 HFRI Returns Highlights

  • Equity hedge funds were the hardest hit by market volatility to be down 12.3% in the first half of the year, but outperformed the S&P 500, which fell 20.6%.
  • Macro hedge funds up 8.98%, although they fell 0.42% in June. (Macro managers trade a broad range of assets, including bonds, currencies, rates, stocks and commodities.
  • Rokos Capital Management’s macro fund was down 4% in June, but is still up by 12% for the year
  • AQR Capital Management global macro strategy fund rose 23.1% through June, as it benefited from an environment of surging inflation and tightening monetary policy, sources said.
  • Event-Driven strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, posted declines in June as the investable HFRI 500 Event-Driven Index fell -4.15 percent and the HFRI Event-Driven (Total) Index lost -4.14 percent for the month.
  • ED sub-strategy declines were led by the HFRI 500 ED: Special Situations Index, which fell -6.5 percent, and the HFRI 500 ED: Multi-Strategy Index, which lost 4.3 percent for the month.

“Despite declines for the month, hedge funds have effectively navigated the intense 2022 volatility with not only Macro, CTA, and Commodity strategies, but the broad-based HFRI 500 Composite Index comprised of all hedge fund strategies each producing the largest outperformance of the S&P 500 and Nasdaq Composite indices, respectively, through the first half of a calendar year since HFR index inception. With expectations for the 1H22 volatility to continue through 2H, institutional investors are likely to increase commitments to strategies which have demonstrated their ability to preserve capital through recent declines, while opportunistically positioning for dynamic positive or negative market environments.” Kenneth J. Heinz, President of HFR added

Source: HFR

Bridgewater Associates Flagship Pure Alpha Fund up 32.2% for H122

Ray Dalio’s Bridgewater Associates Flagship Pure Alpha 18% volatility fund gained 32.2% in the first half of the year, according to a source familiar with the matter, beating sharp market declines. Increasing rates caused extreme swings in asset prices, the source added. The fund posted gains in 65% of the markets where it trades, beating a historical average of 55%.

Since its inception in 1991, Pure Alpha has returned an average of 11.4% annually. Bridgewater, founded by legendary billionaire Ray Dalio, told investors on Tuesday the fund posted gains across several different assets. This more than offset some losses, such as in inflation-linked bonds and emerging market currencies.

Pure Alpha’s good performance comes in a year the firm reshuffled its top management, appointing two new co-Chief Executive Officers, Nir Bar Dea and Mark Bertolini, and creating a new investment committee, which includes Chief Investment Officers Greg Jensen and Bob Prince, its asset class heads and some senior investors.

HFRI Index Methodology

HFRI® Indices are designed to capture the breadth of hedge fund industry performance trends across all strategies and regions. All single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite Index® while all funds of hedge funds are included in the HFRI Fund of Funds Composite Index®. Most HFRI Indices are equally weighted (annual rebalance) while the constituent funds of the HFRI Asset Weighted indices are weighted according to the AUM reported by each fund for the prior month.

To be eligible for inclusion in the HFRI Indices a hedge fund must:

  • Report monthly returns
  • Report Net of All Fees Returns
  • Report assets in USD
  • Meet the AUM minimum eligibility criteria of:
    a) Having at least $50 Million USD under management on the last reported month prior to the annual rebalance, or 
    b) Having at least $10 Million USD under management on the last reported month prior to the annual rebalance and have been actively trading for at least twelve (12) months.
  • Open to new investment
  • Available in a fund structure

Source: HFRI

From The TraderCommunity Research Desk