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After outperforming the major averages in a dismal 2022, hedge funds are off to a “strong start” to 2023, according to UBS, citing the industry’s performance during January.
The firm reported that hedge funds in general saw a total return of 2.8% in January, compared to 6.3% for the S&P 500 index. That means that the group seized approximately 44% of the U.S. equity upside and were broadly even with US bonds during the month.
To put this in context, hedge funds generally saw a 4.1% drop in 2022, compared to a 23.9% decline for the S&P, according to UBS figures. Meanwhile, the firm reported that roughly 75% of all hedge funds experienced positive returns during the first month of 2023.
Among hedge fund categories, equity-hedged saw the best January returns, with gains of 4.2%. UBS noted that this captured 67% of the equity upside, a result that was slightly above the historical average.
See a 2022/2023 comparison chart of different hedge fund strategies:
“Given that most hedge funds started the year with below average risk and less-directional exposure when looking at aggregated positioning, January was a strong start to the year and position hedge funds to build on their 2022 outperformance if markets remain volatile and rangebound,” UBS said.
To start the 2023 trading year the Dow (DJI) sits near flat, the S&P 500 (SP500) is up 3.7%, and the tech focused Nasdaq Composite (COMP.IND) has gained 8.8%.
In broader financial new, stock futures look to rebound after Tuesday’s selloff as investors await the release of the Fed minutes.
