Best’n’Worst October 2022

October was a month of recovery for equity markets. Trend reversed. This had a profound impact on the performance of the best and worst managers.

Based on the latest available return data, we can present the best and worst strategies per category, both on a monthly and on yearly basis. This is calculated from our proprietary composite data streams but may contain errors. These are not filtered for Asset Under Management and are ranked on a simple return metric without adjusting for volatility. We only rank funds that have reported returns for the current reporting month.

CTA

While the general CTA tends to be trend-driven, most of the outliers are driven by specific markets or market effects. In October, we saw diversified strategies coming back and closing the gap with their trend-following peers.

The dispersion for the best/worst funds is high, but you may learn something about how they and correlated strategies react to different market developments. To see the full CTA list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/cta-rankings/

Market Neutral

Market Neutral is one of the least volatile strategies, where returns tend to accumulate over time, rather than printing lumpy returns on the upside or downside. The strategy has been on a positive trajectory since the Value-factor started to recover in 2020. Risk Free capital is no longer free nor free or risk free.

Factor performance tends to dominate the average performance, but specific funds can be exposed to specific strategies that are not captured by academic factors. To explore our extensive Market Neutral list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/market-neutral-rankings/

Equity Long/Short

As per common knowledge, half of the returns for Equity Long/Short strategies are driven by the underlying equity markets. As pointed out, a fair amount of managers missed the recovery in equity prices that took place on the back of lower inflation numbers in October.

Performance for the best and worst managers is typically driven by idiosyncratic security-specific situations. To explore our extensive Equity Long/Short list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/equity-long-short-rankings/

Event Driven

Event-Driven managers are commonly exposed to various arbitrage/spread risks related to specialist situations securities. Managers with concentrated exposure tend to end up on this list and exploring the drivers of out or underperformance may yield insights. To explore our extensive Event-Driven list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/event-driven-rankings/

Fixed Income

Like Equity Long/Short managers, Fixed Income managers are usually driven by the underlying market conditions. In October, market conditions were correlated with Equity recovery and we saw strong results across managers.

For this list, we typically find managers that are sensitive to a specific subsector, and especially managers that are engaged in the lowest part of the capital structure. To explore our extensive Fixed Income list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/fixed-income-rankings/

Risk Premia

Risk Premia managers are commonly implemented well-explored and researched systematic strategies. These may be viewed as a general proxy for Hedge Fund exposure. Performance of specific factors may reveal differences and similarities to your own portfolio. To explore our extensive Risk Premia list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/risk-premia-rankings/

Crypto

As usual Crypto traders are the wildest bunch on the street. To state the obvious, the results below are before the impact of SFX/Alameda/SBF which will largely be reflected in the November update. In prior updates, we have shared the reduced willingness of Retail traders to take risks in Cryptos.

Returns tend to be double-digit (or even triple-digit for the best funds), simply due to the volatility of the asset class. To explore our extensive Crypto Strategy list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/crypto-strategy-rankings/

Past performance is not indicative of future results.