Last year was a terrible year for the markets, even for many hedge funds. According to investment data firm Preqin, hedge fund returns were down 6.5% in 2022, the largest drop since the 13% decline in 2008 during the financial crisis. That’s why global hedge fund managers are preparing for persistent inflation by seeking exposure to commodities and bonds that perform well in inflationary environments. A majority of 10 global asset and hedge fund managers that were surveyed by Reuters said commodities are undervalued and should thrive as global inflation stays elevated this year. In addition, they are also seeking inflation-linked bonds to shield against price rises, and exposure to certain corporate credit, as higher rates restore differentiation in company bond spreads. For instance, London-based hedge fund manager, Crispin Odey is betting inflation will remain high. He told Reuters that "Commodities will start to rise again. They've sold off very heavily and are below operating costs in many instances." Danielle Pizzo, chief strategy officer at Schonfeld Strategic Advisors, told Reuters that her firm “Aims to focus more on investment grade and high-yield bonds this year as well as commodities.”
Finsum:Hedge funds, which saw the largest drop in performance last year since the financial crisis, are concerned about persistent inflation and are seeking exposure to commodities and select bonds.