Many of the world’s largest hedge funds suffered their steepest losses since the COVID-19 pandemic last month, Bloomberg reported on the 4th. A selloff in technology stocks, a slump in government bond markets and the shock from Brazil’s presidential election combined to drive up market volatility. Both credit and equity strategies lost money on the market moves.
JPMorgan Chase’s positioning intelligence team said in a note to clients that October was a month most hedge funds would probably rather forget. The team added that the difficulties were so broad-based that there appeared to be nowhere to hide from a strategy perspective.
Arini, a credit hedge fund, was down 12.1% through Oct. 23 and is on track for its worst monthly loss. Marshall Wace’s Eureka fund fell 5.4% last month, trimming its year-to-date return to 5.3%. ExodusPoint Capital Management lost 2.4%, Millennium Management’s multi-strategy hedge fund 2.3% and equity-focused Northrock 2.3%.
Last month, violent protests in France deepened a selloff in government bonds, while technology stocks slid as concerns over artificial intelligence resurfaced and weak earnings added to the pressure. Currency markets were also hit. Prices swung as Flavio Bolsonaro, a conservative, unexpectedly led the first round of Brazil’s presidential election before losing the runoff to President Luiz Inacio Lula da Silva.
Some funds did post gains. Quantedge, which manages $8.2 billion in assets, jumped 7.2%, lifting its year-to-date return to 60%. Commodities, bonds and a long-short market-neutral strategy drove the performance. A long-short market-neutral strategy buys undervalued stocks and sells overvalued ones short, reducing exposure to overall market swings while seeking returns from the relative performance of individual names. Citadel’s flagship Wellington fund returned 1.7%, raising its year-to-date gain to 15.3%.