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Hedge funds shrug off global uncertainties, make gains in August

hedge_funds_investment_volatilityHedge funds made strong gains in August, recovering from a narrow decline in July, stated Hedge Fund Research (HFR) in its latest report on the sector.

HFR highlighted that advances were made against a backdrop of increasing risks related to the situation in Afghanistan, stimulus reductions from the Federal Reserve, proposed spending legislation, and Covid variants – all adding to ongoing global uncertainty.

Despite these risks, however, hedge funds performed well overall in August, HFR said. The HFRI Equity Hedge (Total) Index increased by 1.2% for the month, with contributions from a wide dispersion of sub-strategy performance led by healthcare, technology, and energy sub-strategies.

HFR’s healthcare index surged by 3.3%, while technology and energy increased by 3% and 2.2% respectively.

Kenneth Heinz, HFR’s president, said: “Hedge funds posted strong gains in August despite an evolving continuum of risk including geopolitical instability, monetary policy, immigration, and ongoing pandemic challenges and complexities, with gains across all strategies led by deep value equity and event driven exposures.

“These and other diverse but powerful trends continue to drive strong performance industry-wide, including cryptocurrency trading, energy exposures and interest rate sensitivity.”

Heinz stated that hedge fund industry capital is at “record” levels and institutions are increasing allocations to hedge fund managers and strategies which have "demonstrated not only performance generation but tactical flexibility to quickly identify and monetize opportunities".

For the eight months leading up to the end of August, the HFRI FWC Index has gained 10% and posted gains in ten of the last 11 months, returning 22% throughout this period, according to HFR’s data. 

Some sectors saw declines last month, however, inluding HFRI's emerging market Asia ex-Japan, China, and Latin America indices.

The HFRI Relative (Total) Value Index increased by nearly 1%, while there was also positive movement across the fixed income space. 

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