Australia’s leading hedge funds are grappling with significant challenges, underperforming benchmarks since the start of the year despite strategies designed to thrive in volatile market conditions. The ongoing conflict in the Middle East and concerns over artificial intelligence disruption have fuelled wild stock movements, impacting several high-profile funds. Totus Capital’s Alpha Plus Fund, an investment fund managing capital for accredited investors, which employs complex portfolio strategies, fell 6.2 per cent in March alone, now down 15 per cent year-to-date. The fund was notably caught out by bets against surging energy stocks like Woodside Energy and Whitehaven Coal.
This trend of underperformance extends across the sector. Caledonia’s flagship fund has declined 24 per cent since January, significantly impacted by its investment in American housing app Zillow. Similarly, Regal Long Short Equity Fund plunged 19 per cent in March, resulting in a 17 per cent year-to-date loss. The Montaka Global Extension Fund has been among the hardest hit, recording a 30 per cent decline this year. These sharp drops come as the S&P/ASX 200 plummeted nearly 8 per cent in March, its worst month since 2022, and the MSCI World Index also saw a 6.3 per cent fall.
Minotaur’s Global Opportunities Fund, exposed to the software sell-off dubbed the ‘SaaSpocalypse,’ fell almost 8 per cent in March, marking its worst month relative to its benchmark. QVG Capital’s Long Short Fund also tumbled 8 per cent, affected by holdings in wealth platform Hub24 and negative sentiment in private credit. Even last year’s top performer, Paragon’s commodity-focused Australian Long Short strategy, sank more than 30 per cent in March due to a violent reversal in precious metal prices. While these drawdowns are substantial, many fund managers emphasise that hedge funds are typically assessed on their ability to outperform the broader market over longer investment horizons, rather than short-term fluctuations.