Hedge Fund Indices

As we eluded to in our earlier post, 2022 was not a great year for several strategies. But, CTAs and in particular systematic managers generated substantial returns. Our broad CTA index generated close to 5%, whereas Systematic managers added approximately 150bps in addition. Discretionary managers outside the Commodity sector did less well.

Outside of the Crypto meltdown, the largest losses took place for Risk Parity managers. A strategy that historically has benefitted from the low correlation between stocks and bonds. Something that did not persist throughout 2022.

Equity Risk Premia-related (outside growth-oriented managers) strategies all had a negative year but did not suffer as badly as in 2008. One of many reasons for this is the relatively benign volatility environment. They clearly did outperform most equity indices, but expectations are for positive returns.

We are launching additional indices in 2023, some of which are hinted at in the above table. To ensure that your fund is included in the 2023 edition of our indices, ensure that we have your December 2022 return no later than the last weekend of January 2023.

Our main CTA index generated -0.2% for December and has delivered 4.5% YTD. In terms of the man-vs-machine battle, Systematic strategies delivered -0.5% (YTD: 6.1%) while Discretionary traders returned 0.5% (YTD: -0.8%).

This is based on a representative sample of CTA managers. We claim that our CTA indices are the broadest performance barometers on the markets and offer extraordinary transparency when it comes to capturing the broader returns from Managed Futures managers.

Taking the man-vs-machine battle further, Equity Market Neutral Strategies returned 0.3% for December, and have delivered 1.1% YTD. Systematic EMN strategies returned 0.4% (YTD: 1.1%) while Discretionary traders returned 0.3% (YTD: 1.0%).

EMN managers have almost recovered all of the value-oriented drawdowns that took place in 2020/21.

To view estimates of current performance, our daily indices provide unique insights (https://nilssonhedge.com/index/daily-indices/). These are a set of daily hedge fund indices, covering CTAs, Market Neutral, Equity Long/Short, Event Driven, and Crypto managers. Our daily indices were reconstituted at the end of 2022. We disclose all of the index members.

We typically deliver index estimates on T-1, making them the fastest indicator of hedge fund performance available. These indices help you to form a narrative, understand exposures, benchmark existing managers, and to explain performance to clients.