When Inflation Is High, Hedge Fund Managers Thrive

Among the highlights of our analysis, we found that once interest rates reach an elevated level, all hedge fund strategies, as a group, significantly outperformed the S&P. However, while periods of high rates aren’t great for equities, it’s a different story on the way up, as equities generally set a tough benchmark for hedge funds to beat.

When rates move back down, all HF strategies outperformed equities on the way.

As noted by CEO Jon Caplis “Overall, a diversified hedge fund portfolio does pretty well. It doesn’t outperform equities when rates are rising, but it holds its own,” Caplis said. “The kicker is when rates fall, hedge funds do really well, and over time you could outperform the S&P by 800 basis points when the S&P is kind of flat.”


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