Key facts
- Global hedge funds saw mixed performance in September.
- Fundamental equity long-short funds lost 0.55% on average in September.
- Systematic equity long-short funds gained 3.46% in September, their best monthly performance this year.
- US Treasury yields reached two-decade highs in September.
- Asian hedge funds across strategies fell 0.6% through September 25.
- Bridgewater Associates' Pure Alpha macro fund returned 18.4% year-to-date.
Global hedge funds experienced a mixed performance in September, with factors such as surging bond yields, elevated oil prices, and volatility in AI-related stocks impacting returns. While some strategies faced losses, others capitalized on market movements.
According to Goldman Sachs Prime Services, global fundamental equity long-short funds averaged a loss of 0.55% in September, though they outperformed the MSCI World Index, which fell 1.3%. In contrast, computer-driven systematic equity long-short funds achieved their best monthly performance this year, rising 3.46%.
Central bank actions were a dominant theme in September. The US Federal Reserve raised interest rates and indicated further hikes, while geopolitical tensions, including the US-Israeli war on Iran, contributed to higher oil prices and pushed US Treasury yields to two-decade highs.
Swings in AI-related technology positions, driven by expectations of a spending slowdown, complicated short-term trading. In the US, hedge funds broadly sold sectors, with electronic equipment and hardware experiencing sell-offs, while semiconductor equipment and software saw strong inflows, according to Goldman Sachs.
In Asia, economic uncertainty limited hedge fund performance. Morgan Stanley estimated that Asian hedge funds across strategies fell 0.6% through September 25, compared to a 0.2% global decline.
Some strategies benefited from sharp moves in commodities and rates. Bridgewater Associates' Pure Alpha macro fund reported an 18.4% return for the first nine months of the year. Trend-following hedge funds were also among the winners, with the Société Générale trend index gaining over 4% in September, driven by short fixed income and long energy positions.
Analysts suggest the current rate-hiking environment could lead to greater divergence in hedge fund returns, with some benefiting from higher short-term rates while others face increased financing costs.