Hedge Funds Face Challenges in September Amid Rate Hikes and AI Volatility
Global hedge funds struggle with September losses as rate hikes, oil prices, and AI swings disrupt markets. Trend funds shine.
POLICY WIRE — New York, United States — Global hedge funds faced a difficult month in September as rising bond yields, surging oil prices, and erratic movements in artificial intelligence stocks created market turbulence, according to prime brokerage reports and investor analyses.
According to Goldman Sachs Prime Services, global fundamental equity long-short funds lost an average of 0.55 percent in September, although they still outperformed the broader MSCI World Index, which declined by 1.3 percent during the same period. In contrast, systematic equity long-short funds saw gains of 3.46 percent, marking their strongest monthly return of the year.
The month was shaped by central bank actions, including the U.S. Federal Reserve’s first rate increase since 2023, signaling potential further hikes ahead. Meanwhile, tensions in the Middle East pushed oil prices higher and sent U.S. Treasury yields to two-decade highs. Fears of a slowdown in AI spending also led to sharp fluctuations in tech stocks, complicating trading strategies across the globe.
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In the U.S., hedge funds sold off most sectors in September, but within the technology space, there was a clear divergence: electronic equipment and hardware faced selling pressure, while semiconductor equipment and software attracted strong inflows. In Asia, Morgan Stanley reported that hedge fund performance was subdued due to economic uncertainty, with Asian funds losing 0.6 percent through September 25, compared to a 0.2 percent decline globally.
Trend-following hedge funds were among the top performers in September, with the Société Générale trend index climbing over 4 percent. The gains were largely driven by short fixed income and long energy positions, according to Winton Group. Industry experts warn that the ongoing rate-hiking environment could lead to greater disparities between different hedge fund strategies.
Some benefit directly from higher short-term rates, while others face increased financing costs that can significantly reduce returns, said Don Steinbrugge, CEO at Agecroft Partners. Among individual funds, Dymon Asia posted a 0.7 percent gain for the month, while Pinpoint suffered a loss of 1.5 percent. Bridgewater’s Pure Alpha fund gained 6 percent in September, and multi-strategy funds remained relatively flat on a monthly basis.
Reporting by Policy-Wire (PW)
