Hedge funds recorded their strongest monthly gains in more than seven years in January, before turmoil shook global markets this month.
Funds gained an average 2.7 percent last month on an asset-weighted basis, according to Hedge Fund Research. That’s the best performance since December 2010. Macro hedge funds led the group, followed by equity strategies.
The January returns could be overshadowed by this month’s shakeout, that has seen stocks from the U.S. to Asia plunge, rebound then fall anew, while bonds and currencies have also fluctuated wildly. That could help funds that thrive on volatility, while investors who have taken bullish positions may be hurt.
“Hedge funds, especially equity funds, were definitely affected by the market turmoil but are still generally positive for the year,” said Chauwei Yak of asset manager GAO Capital, which runs hedge fund research platform QuantFlix. “Many quant funds including vol and macro strategies struggle when there is a sudden change in volatility, but will benefit once their model adapts to the new volatility regime.”
While all main strategies advanced in January, industry performance was led by macro strategies, according to Hedge Fund Research. The HFRI Macro (Total) Index climbed 3.7 percent, the biggest monthly gain since February 2008. Equity hedge funds also surged, with the HFRI Equity Hedge (Total) Index advancing 3 percent, led by technology and emerging markets.
Among macro funds which gained were Paul Tudor Jones’ Tudor Investment Corp., which posted a 4.8 percent return in January in its largest fund, and Louis Bacon’s Moore Capital Management, whose main fund rose 5.7 percent through Jan. 25.
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