Pivotal Point of View – June 2022

The Pivotal Point of View Commentary

The takeaway first:

  • Media headlines continue to focus on a few large hedge funds which have struggled in 2022, reinforcing the narrative that hedge funds as a group have struggling mightily.

  • A broader analysis of the data paints a much more positive picture, illustrating that these large single fund losses are outliers and not reflective of the industry.

  • The PivotalPath Composite lost only 1% through May. Of the ten super strategy indices covered by PivotalPath, five are positive, four are negative and one is flat through May.

  • 47% of all hedge funds are positive YTD, while 62% have lost 1% or less. 8% have lost more than 25%.

  • YTD through May, the Composite Index is outperforming the S&P 500 by ~12%. That spread has only grown thus far in June.

  • One would have to go back to 2008 to find a larger outperformance in a calendar year.

The backdrop:

  • May provided a slight and temporary respite (S&P 500 and Russell 2000 roughly flat and the Nasdaq falling ~2%) in the midst of spiraling inflation further induced by a slow Fed and global central banks, open ended war and continued supply shocks.

  • The S&P, Russell 2000, and Nasdaq are still down 13%, 17%, and 23%, respectively, through May.

  • Commodities, led by natural gas futures (+12.4% MTD and +118% YTD) and crude oil futures (+9.5% MTD and 52% YTD) continue to push higher while China slowly started re-opening after Covid shocks and lock-downs.

  • The downturn in Bitcoin (-17% MTD and -31% YTD) and Ethereum (-30% MTD and -47% YTD) helped fully dispel the notion of cryptocurrencies acting as a hedge against inflation.

  • PivotalPath Baskets most sensitive to interest rates and overall economic downturns fell significantly in May; the worst performing was the Transportation Basket (-20.5%), including names such as Carvana and Lyft which were down 49% and 46%, respectively; Brick and Mortar Retail was down 14.3%, Food Delivery -11.8%, and Small Cap Biotech -11.2%

Global macro, CTAs and quant strategies in general continue to perform:

  • The PivotalPath Global Macro Index and the Equity Quant Index gained 0.2% and 1.6% respectively in May and are up 9.7% and 4.2% YTD.

  • Managed Futures is still the best performing index YTD (up 13.9%) after a 0.4% decline in May.

The equity impact:

  • PivotalPath’s Equity Diversified Index (L/S equity strategies globally) is down only 5.5% YTD as funds pared risk coming into 2022.

    • Its beta of 0.27 to the S&P 500 is the lowest level since January of 2019 and December of 2009 before that.

  • Just like the sectors they trade, equity sector focused PivotalPath Healthcare Index and Technology Media and Telecom Index have led sector strategies lower, shedding 5.4% and 4.9% respectively in May and down 19.5% and 18.6% YTD.



Interested in actionable hedge fund data 
and industry–leading research?

We provide transparency for Allocators.

Get Started