News Digest: Global hedge funds plan 2023 around inflation risk
January 6, 2023
Having recorded its worst returns in 14 years, global hedge funds are now preparing their 2023 strategies around inflation risk. Though these funds faced tough times as asset prices were stymied by the Fed’s extremely tight monetary policy, their losses remained smaller compared to the meltdown of the equity and bond markets during 2022.
Published data now suggests that some hedge funds took up macro-oriented strategies such as investing in commodities and currencies, besides betting on the price discrepancies between the related securities.
Data shared by Preqin says global hedge fund returns fell by 6.5% in 2022, the biggest slump since 2008 when returns declined by a massive 13%. However, the MSCI World Index, which tracks large and mid-cap equities across 23 geographies, fell by 18.7% while the ICE BofA US Treasury index lost almost 12% during the same period.
The report says most global asset and hedge fund managers hold the view that commodities are currently undervalued and could witness an upswing in 2023 amidst expectations that inflation would continue to be high.