Macro Breaks Run with Gains in September

Macro hedge funds ended a run of four successive negative monthly returns by gaining in September, while Event-Driven funds had a rare month basking in the limelight of strategy-leading performance.

The period of decline followed four months of gains to start the year, according to hedge fund indexation and analysis firm HFR, with the HFRI Macro (Total) Index rising 1.3% and the HFRI Macro (Total) Index – Asset Weighted adding 1.4%. Gains were led by Discretionary Thematic and Multi-Strategy exposures, the HFRI Macro: Discretionary Thematic Index led Macro sub-strategy performance in September, jumping 3.0%, while the HFRI Macro: Multi-Strategy Index added 2.1% for the month.

The overall HFRI Fund Weighted Composite Index gained 1.2% and the HFRI Asset Weighted Composite Index added 1.4%, HFR says, led by the HFRI Event-Driven (Total) Index, which advanced 1.8%.

The recently launched HFRI Multi-Manager/Pod Shop Index rose 0.6%, and the HFR Cryptocurrency Index rose an estimated +5.4%, increasing its YTD return to +17.7%. The Pod Shop Index is comprised of funds of various strategy types that utilise a multi-manager or Pod Shop structure, whereby fund capital is allocated to multiple independent investment teams referred to as Pods. The Pods are autonomous but generally operate within certain portfolio management or risk guidelines, and capital is allocated to or from these Pods in a discretionary manner under the supervision of a chief investment officer.

Fixed income-based, interest rate-sensitive strategies also advanced in September, the HFRI Relative Value (Total) Index gained an estimated 0.8% and the HFRI RV (Total) Index – Asset Weighted advanced 1.4%.

Performance dispersion expanded in September, as the top decile of the HFRI FWC constituents advanced by an average of +8.9 %, while the bottom decile fell by an average of -4.1%, representing a top/bottom dispersion of 13.0%. The top/bottom performance dispersion in August was 11.5%, and in the trailing 12 months ending September 2024, the top decile of FWC constituents gained +41.1%, while the bottom decile declined -11.9%, representing a top/bottom dispersion of 53.0%.

HFR says approximately 70% of hedge funds produced positive performance in September.

“Hedge funds gained to conclude the volatile third quarter, which included one of the largest intra-quarter spikes and dislocations in financial market volatility in several years, as geopolitical risks remained at generational levels, and as economic risks shifted from inflation to weakening global economic growth,” says Kenneth Heinz, president of HFR. “Gains were strong across all strategies, led by Event-Driven exposures as investors positioned for an improving M&A environment into year-end, while Macro strategies recovered from several months of declines as managers navigated a major inflection point in interest rate expectations.

“Hedge fund managers continue to position for risks into year end, including geopolitical risks (upcoming election and ongoing military conflicts), as well as the way in which interest rate and economic risks have evolved in the past few months, while maintaining a keen awareness of the recent volatility spike and the potential for dislocations,” he continues. “Institutional investors interested in accessing many of the opportunities created by these rapid adjustments, as well as portfolio protection from associated volatility, are likely to increase exposures to managers which have demonstrated their strategy’s ability to deliver performance through recent volatility market cycles.”