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Concerns over rising inflation continue to weigh on markets with the Federal Reserve raising its inflation forecast for the year to 4.2%, up from the previous estimate of 3.4%, driven by supply chain bottlenecks and the developing energy crisis in Europe and China which has pushed energy prices up by 11.60% in September.

Compounding matters further, the OPEC+ decided to keep the supplies of oil tight leading to a surge in oil prices, with Brent crude oil and West Texas Intermediate crude oil up 9.52% and 9.91% in September respectively.

In addition, the Federal Reserve announced that the tapering of quantitative easing would likely begin in November 2021 and finish by mid-2022, bringing an end to their bond buying programme. Against this backdrop, the 10-year US Treasury gained 19bp, the most since March 2021.

The heightened risk aversion led to sharp declines in major US equity indices, with the NASDAQ, S&P500 and DJIA down 5.31%, 4.76% and 4.29% respectively. Over in Europe, returns were negative among equity benchmarks in the region with the DAX, Euro Stoxx 50 and CAC 40 down 3.63%, 3.53% and 2.40% respectively.

The ongoing energy crisis as well as the political uncertainty post-Germany elections dampened market risk-on sentiment. Despite the challenges in Europe, the European Central Bank revised economic projections upward and aimed for a moderately lower pace of net asset purchases under the pandemic emergency purchase programme in the fourth quarter.

Returns were mixed across geographic mandates in September with Japanese hedge funds leading the group with a return of 2.76% while Emerging Markets and Latin American hedge funds trailed behind their regional peers with returns of -0.68% and -1.79% respectively. Across strategies, distressed debt, arbitrage and event driven outperformed their strategic peers with returns of 1.02%, 0.56% and 0.54% respectively throughout the month.

In terms of 2021 performance, global hedge funds were up 8.27%

Hedge fund managers returned -0.33% in September, outperforming the global equity market as represented by the MSCI ACWI (Local) which returned -3.55% during the month. In terms of 2021 performance, global hedge funds were up 8.27%, recording the strongest September year-to-date return since 2009 despite the ongoing pandemic. Around 76.7% of the constituents of the Eurekahedge Hedge Fund Index generated positive returns in 2021.

On an asset-weighted basis, hedge funds returned -0.93% in September, as captured by the Eurekahedge Asset Weighted Index - USD. In terms of 2021 performance, the index is only up 3.04%, highlighting the struggles for some of the larger asset managers over the year.

The Eurekahedge North American Hedge Fund Index returned -0.15% in September, outperforming the S&P 500 and DJIA which returned -4.76% and -4.29% respectively. American stock markets came under pressure after the Fed stated that the tapering of quantitative easing would likely begin in November 2021 and will finish by mid-2022. On a year-to-date basis, North American fund managers were up 11.71%, recording their best September YTD performance since 2009.

Eurekahedge European Hedge Fund Index returned -0.05% in September

The Eurekahedge European Hedge Fund Index returned -0.05% in September, outperforming the pan-European Euro Stoxx 50 which returned -3.53%. Market risk sentiment was dampened due to the developing energy crisis in Europe and the heightened political uncertainty post-Germany elections. On a year-to-date basis, European fund managers were up 7.71%, recording their best September YTD performance since 2009.

The Eurekahedge Distressed Debt Hedge Fund Index gained 1.02% in September, extending their streak of consecutive positive monthly returns to twelve months. On a year-to-date basis, distressed debt hedge funds outperformed all of their main strategic peers and were up 13.14%, recording their best September YTD performance since 2009.

The Eurekahedge Commodity Hedge Fund Index gained 2.81% in September, supported by the strong return of the S&P GSCI Index which returned 6.03%. Energy was the best performing component in September, posting a return of 11.60% as Brent Crude Oil and West Texas Intermediate Crude Oil surged 9.52% and 9.91% respectively after OPEC+ decided to keep supplies tight despite the ongoing global energy crunch. On a year-to-date basis, commodity hedge funds were up 12.85%, recording their best September YTD performance since 2006.

Fund managers focusing on cryptocurrencies returned -9.05% in September as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, outperforming Bitcoin which returned -11.61% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 119.84%, outperforming Bitcoin which returned 44.39% over the first nine months of the year.