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In January, global financial markets surged to begin 2023 with gains driven by falling interest rates and a slowing of the inflationary pressures that defined 2022. Global equity markets surged led by US Technology, Growth, and Cyclicals; regional gains were strong across Emerging Markets, Developed Europe, and Asia. Interest rates declined on slowing inflationary pressures despite expectations for continued increases by the US Federal Reserve. The US Dollar fell against most currencies. Aluminum, Copper, and Lumber led Agricultural gains while Natural Gas posted a sharp decline.
Hedge Funds posted gains in January led by Event Driven strategies with the HFRX Event Driven Index gaining +2.31% and the HFRX Market Directional Index gaining +3.50%. The HFRX Global Hedge Fund Index gained +1.67% in January.
HFRX Event Driven Index gained +2.31% in January from gains in Special Situations strategies partially offset by Merger Arbitrage managers. The HFRX Special Situations Index posted a gain of +2.51% from gains in exposure to global, catalyst-driven, fundamental value equities. The HFRX Merger Arbitrage Index declined -0.65% as activity in global M&A deals slowed down in January.
HFRX Relative Value Index gained +2.30% for the month from strong gains in Convertible Arbitrage strategies and Multi-Strategy managers. The HFRX Convertible Arbitrage Index gained +4.07% as volatility declined in January. The HFRX RV: Multi-Strategy Index gained +2.13% as interest rates declined despite expectations for future rate increases by the Federal Reserve.
HFRX Equity Hedge Index gained +1.56% in January led by gains in Fundamental Growth and Value strategies offset by declines in Equity Market Neutral strategies. The HFRX Fundamental Growth Index gained +3.02% for the month from gains concentrated in small-cap US, European, and Emerging Markets equities. The HFRX Fundamental Value Index gained +0.95% from gains in exposure to large-cap US and European equities. The HFRX Market Neutral Index declined -0.14% from declines in mean reverting, factor-based strategies.
HFRX Macro/CTA Index gained +0.03% for the month. The HFRX Macro Systematic/CTA Index posted a decline of -0.98% for the month as the US Dollar fell against most currencies. Commodities saw mixed performance in January led by Lumber, Aluminum, and Copper. Commodity declines were led by Natural Gas, Lean Hogs, and Platinum.
Comments reference performance figures as of January 31, 2023