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Fixed income is top strategy for flows, bottom for returns while multi-strategy funds post middling returns in October

Tuesday, November 30, 2021
Opalesque Industry Update - The HFM Fixed Income/Credit Index fell 0.3% in October, the worst return among With Intelligence's range of HFM strategy indices last month. The result leaves the index at 5.3% YTD, around half that of the HFM Global Composite, at 10.2% YTD.

Many hedge funds were caught out last month by significant fluctuation in the bond market, as expectations shifted overthe prospect of central banks tightening policy. End investors and managers alike inaccurately forecasted shifts in government bonds, causing losses at the long ends of the yield curve. As a result, most fixed income managers ended the month in the red, although some of the more high-profile losses were accrued by brand-name macro specialists.

Multi-strategy hedge funds posted muted performance in October at 0.7%, one of just three top-level strategies not to generate a return greater than 1%. However, the strategy remains in the upper end of YTD performance, with the HFM Multi-strategy Index at 10.5%, trailing just the event-driven and equity indices, and ahead of the HFM Global Composite and all other top-level strategies. Just over three in four multi-strategy hedge funds tracked by HFM have posted positive returns in 2021 so far.

The HFM Fixed Income/Credit Index fell 0.3% in October amid bond market volatility/ Investor flows for fixed income last month were significantly positive, adding net $3.7bn.

Increased inflation should encourage further inflows into fixed income/credit. Multi-strategy hedge funds recorded a modest performance gain last month, up 0.7%.

Investor flows for multi-strategy were flat, but a vast improvement on September's $4bn net outflow. The recent loss of investor confidence in multi-strategy was linked to inflation and lingered into October.

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