The cause of the 10-point drop-off in the overall average confidence of hedge funds since the third quarter of 2022 is multifaceted, but will undoubtedly be partly due to the combined challenges of the deluge of radical regulatory proposals from the U.S. SEC and a chaotic macroeconomic landscape which showed no signs of settling as the new year began. AIMA's ‘Hedge Fund Confidence Index Q4 2022’ shows rising interest rates, higher inflation levels, the very real threat of recession, and broader market uncertainty underpin an increasingly downbeat economic outlook. This comes after a dismal year in which global equities lost over 20 per cent of their value while bonds also tumbled. Subsequently, 60/40 portfolios (for a long time regarded as being the optimum investment strategy for pension plans and other institutional investors) posted one of its biggest annual negative returns of close to 20 per cent. By comparison the average hedge fund expected to end the year down between four per cent and six per cent amid a mixed bag of performance with some hedge fund strategies (global macro, CTA/managed futures, and multi-strategy) delivering some very strong returns for their investors.
- PWC