Global Hedge funds gave the poorest returns in 14 years; Equities and Bonds slumped more.

Despite the fact that aggressive U.S. interest rate increases have severely hurt asset prices, global hedge funds are expected to post their poorest returns in 14 years in 2022. Nevertheless, their reductions are generally less severe than the slump in the equity and bond markets this year.

Some macro-focused hedge fund strategies that invested in commodities and currencies and took advantage of price discrepancies between related securities did well in 2022, giving investors respectable returns.

According to Meisan Lim, managing director of hedge fund research at Cambridge Associates, “both equities and bonds have been quite sensitive to macro events, particularly to inflation prints,” more so than at any other point in recent memory.

The largest reduction in hedge fund returns since a 13% decline in 2008 has occurred this year, according to investment analytics company Preqin.

This contrasts with the declines of 11.9% and 18.7%, respectively, of the ICE BofA U.S. Treasury index and the MSCI World index.

According to HFR data, equity-hedged and event-driven strategies lost 9.7% and 4.7%, respectively, while macro funds gained 8.2% through November of this year.

According to a note from UBS, “Macro as a strategy has historically been less connected to moves in the larger stock market, helping to diversify portfolios.”

“We anticipate that macro managers should benefit in 2023 from further tight monetary policy and significant volatility.”

According to the HFR data, activist funds, which employ minority shares to press for management and strategy changes to increase shareholder value, fell 13.8%.

According to Andrew Hendry, head of Asia at Janus Henderson Investors, a global asset manager that also manages a 900 million euro ($955.17 million) long-short Global Multi-Strategy Fund, trend-following strategies prospered in 2022 because of the inflationary climate.

Markets that first move in one direction are more likely to keep moving in that direction, according to Hendry, who explained that trend-following, is based on the theory that markets process information inefficiently and at various speeds.

“Things like robust commodity prices and weak bonds contributed significantly to performance,” the trend said of 2022.

Along with the decline in traditional assets like bonds and equities, global hedge funds’ net assets declined 4.8% to $4.3 trillion in the first three quarters of this year. According to Preqin data, they had a combined outflow of $109.8 billion over that time.

The report showed that only 915 funds were launched this year, the fewest in ten years.