The Eurekahedge Hedge Fund Index declined -1.05% in January 2022, outperforming the global equity market as represented by the MSCI ACWI (Local) which declined -4.91% over the same period.
Global equities tanked as rising bond yields and the escalating tensions between the United States and Russia over Ukraine led to heightened risk aversion among market participants.
The Federal Open Market Committee (FOMC) has suggested that it is very likely to hike rates in March just as quantitative easing ends, underpinned by high inflation and a strong labour market.
The US consumer price index has surged to 7.5% in January, the highest level since February 1982, putting pressure on the Federal Reserve to hike rates sooner rather than later.
The yield on the 10-year Treasury note hit 1.78% for the first time since December 2019 on the prospect of tighter monetary policy, negatively impacting the global equity market. The NASDAQ Composite and the S&P 500 posted sharp declines of -8.98% and -5.26% in January respectively, their worst monthly performance since March 2020.
Over in Europe, returns were negative among equity benchmarks in the region with the Euro Stoxx 50 and DAX down -2.88% and -2.60% respectively. In contrast to the Federal Reserve, the European Central Bank maintains the view that inflation is still transitory in nature and has no plans to raise rates until the 2% inflation target is reached.
Returns were negative across geographic mandates in January, with Latin American hedge funds the only exception reporting a positive return of 1.98% while the European and North American mandates trailed behind with returns of -1.47% and -1.51% respectively.
Across strategies, the CTA/managed futures and distressed debt mandates performed the best with returns of 1.06% and 0.67% respectively while the event driven and long/short equities mandates lagged their peers with returns of -1.82% and -2.17% respectively.
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