S&P losses are pushing major hedge funds into a wall
The S&P is down by 8.1% this month, leaving many firms that specialize in investing with major losses. Hedge fund losses are growing, which leaves many firms in a hot spot. The fears of rising interest rates and the Ukrainian crisis have pushed the global economy into a tight position. Investors are still having second thoughts and some doubts about how aggressive central banks will be.
The Federal Reserve has already commented that if inflation does not shrink, there might be six interest hikes this year. The fear of the macro effect of interest hikes on small businesses and the economic structure as well is bigger than before. Based on the January hedge fund analysis, the report found that the equity hedge fund index declined by 3.4% in January. The decline came as a reflection of the underperformance of the S&P, which is considered the worst gain since the start of the pandemic in March 2020.
Many hedge funds firms start 2022 off, and one of the reasons for this sidestepping is inflation and the Omicron variant. Furthermore, the mixed stock performance of tech stocks has a significant impact on equity hedge fund gains.
Though Citadel has posted its January gains, the hedge fund Citadel posted gains of 4.71% in January. On top of that, its global fixed income gained 4.91% this month.
- The Tiger Global Hedge Fund declined by 14.8%.
- Whale Rock Capital Management’s hedge fund lost 15.9%.
- Melvin Capital management lost 15%.
- Light Street capital management lost 15%.
On the other hand, Millennium hedge funds ended the month with gains of 1.72%, according to official speakers of the firm. January hedge funds are alarmed. More will come, according to traders. The tension between the U.S. and Russia is high, and the fears of military invasion are at their highest levels. Investors now focus on the Ukrainian crisis and its impact on the European stock market and global supply.
Things will get more painful for hedge funds.
Despite the big gains of the S&P, its stock performance is considered the worst performance since March 2020. As the Omicron remains a primer concern for the Federal Reserve and the market as well. To get into the depth more, the global economy is suffering from a supply shortage. This had a negative impact on major brands. The stock prices are going down due to poor supply abilities. Add to that the rising fears of the monetary tight policies and March interest hikes.
According to traders, if leverage investors keep losing money, this might take the hedge fund into a high level of uncertainty. Leverage trader losses doubled as a result of the federal tightening policy. The federal government has pulled the carpet from the booming tech stock feet. This doubled their losses and their fore hedge funds losses. This might force the hedgy funds to keep buying back securities to close out a short open position. Yet the problem will not get fixed, in contrast, it will have another extension and effect.
If hedge funds continue buying back securities, this might increase the treasury yield by a few points. Inflation surges might stay for some long time and the average domestic buyer purchasing power may decline to its lowest level in decades.