By Senad Karaahmetovic
Hedge funds continued to face challenges in May, driving their total losses this year to 3% as investors reacted to potential recession risks, according to a report by data firm HFR.
The composite index that tracks the performance of hedge funds was down 0.58% last month due to a surge in volatility in several financial markets, pushing all fund categories into the red. On the other hand, 40% of the hedge funds compiled saw gains.
According to the HFR, equity hedge funds saw an 8% loss during the first five months of 2022, making them the worst-performing hedge fund category. However, the category still did better than the benchmark index, which plummeted nearly 13% during that period.
Hedge funds that are highly exposed to high growth sectors including technology and healthcare have also faced headwinds this year, with one of the biggest firms in the industry Tiger Global Management, sustaining a 14% loss in May, and 52% since the start of the year.
“Hedge fund outperformance of U.S. equities continued in and through the extreme financial market volatility in May, with managers navigating not only the continuation of the Russia/Ukraine war, record energy price increases, generational inflation, and increasing interest rates, but with the additional factor of increased likelihood of a consumer led U.S. economic recession,” stated Kenneth Heinz, president of HFR.
Meanwhile, Macro hedge funds are up 9.32% year-to-date, despite losing 0.31% in May.