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Hedge funds, financial markets recover in July after challenging first half

Businessman draws increase arrow graph corporate future growth year 2021 to 2022. Development to success and motivation.

Businessman draws increase arrow graph corporate future growth year 2021 to 2022. Development to success and motivation.

Galeanu Mihai

After a tough first half of 2022, hedge funds and financial markets rebounded in July signaling that investors’ risk appetite has widened, according to a monthly report by PivotalPath, which tracks over 2.5K institutionally-relevant hedge funds, spanning more than $2.5T of industry assets.

That comes as equity returns for July have erased all of June’s losses, with the S&P 500 (SP500) +9.2%, Russell 2000 (RTY) +10.4% and Nasdaq (COMP.IND) +12.4% in what some are calling a relief rally. YTD, though, those indices declined 12.6%, 16% and 21%, respectively against a backdrop of mounting recession fears, worsening economic data and tighter monetary policy.

Looking at a gauge for hedge funds’ performance, the PivotalPath Hedge Fund Composite Index, for instance, rose 0.9% in July vs. a decline of 1.8% in June. The index is now off 2.2% for the year.

Managed Futures (-2.5%) and Global Macro (-0.8%) strategies for July gave back some of their robust performance this year, the report showed. YTD, they’re still up 12.9% and 9.0%, respectively. On the flip side, Equity Diversified rebounded 2.9% and is now off 6.8% for the year.

And while value has outpaced growth so far in 2022, July experienced the reverse with a recovery in growth sectors, PivotalPath noted.

As a testament to growth outperforming value, Ark’s Innovation ETF (NYSEARCA:ARKK) +9.5% fared better than Warren Buffet’s Berkshire Hathaway (NYSE:BRK.B) +8.3% in July, as seen in the chart below. In the past year, though, ARKK (-60.7%) fell significantly while BRK.B (+3.7%) managed to eke out a small gain.

Hedge fund activity during Q2: Activision for Buffett, Soros in Tesla, Tepper likes Netflix.

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