Here Are the Hedge Fund Surprises From 2021


Equity sector and CTAs were cut down by Omicron, a tech sell-off, and inflation fears last month. Still, investors did well with hedge funds this year, particularly in credit, quant, and multi-strategy.

November was brutal on almost all hedge fund styles, with managed futures and equity sector funds leading the way. Investors can blame new Covid-19 variants and inflation fears for the worst month for hedge funds since March 2020. PivotalPath’s composite index lost 1.7 percent for the month, while the research and data firm’s managed futures index was down more than 2 percent in November. PivotalPath tracks 2,400 institutional hedge funds, representing $2.4 trillion in assets.

Managed futures — commodity trading advisers — suffered when investors ran for safety. “The markets have been up in the 20s generally,” said Jon Caplis, CEO. “You have energy and commodities, which have rallied all year. Both growth and value have been making money. Everything was working and people were comfortable taking risk. Then that reversed. So if you are a trend follower, which most CTAs are in some way, you were probably on the wrong side of that trade.” Managed futures are still up more than 8 percent for the year. 

It was a more nuanced story for equity sector strategies. Healthcare funds were dragged down by losses in biotech, while financials were hurt as the 10-year Treasury rallied.

The performance of TMT — tech, media and telecom — funds, however, can’t be explained simply by looking at technology overall. The Nasdaq, for example, eked out a small gain of 25 basis points. In contrast, hedge funds took very specific and active bets. “That’s not the story at all. The exposure and correlation of TMT managers to the Nasdaq has been coming down for a while,” said Caplis. In November, the funds were hurt by the performance of certain sectors in tech, such as mobile payments and SAAS companies. Both baskets were down almost 12 percent last month. PivotalPath’s TMT index was down 2.8 percent. 

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