Hedge funds are setting records at the end of historically volatile 2020

One of the most turbulent years in modern history is coming to an end — and hedge funds are racking up their best returns in a generation.

Hedge Fund Research’s HFRI 500 — an equal-weighted index of the world’s largest hedge funds’ returns — soared 6.2 percent in November from October, its biggest month-to-month gain since December 1999 and the second-largest month-to-month increase since the index’s inception in 1990.

Year to date, the HFRI 500 is up a whopping 7.3 percent.

The record-setting monthly performance comes after the coronavirus outbreak sent 2020 into a tailspin, shuttering huge portions of the global economy, sending unemployment soaring, and putting the market into a March crash that saw the S&P 500 fall more than 33 percent in less than a month.

The HFRI 500 fell 12 percent in the first three months of 2020, dropping more than 9 percent in March alone. 

But hedge funds have weathered the storm and are benefiting from a market rebound that has the S&P 500 up more than 16 percent on the year, with the biggest surge coming in November.

That bounce for hedge funds was “driven by a combination of the US election results and optimism regarding development, approval and availability of multiple coronavirus vaccines,” HFR president Kenneth Heinz said in a statement.

It almost didn’t even matter what hedge funds were doing in November as virtually every strategy seemed to be a winner. Funds focused on equities trading led the pack, popping 8.7 percent in November, and reflecting a stock market that skyrocketed almost 11 percent during the month.

On the flip side, an uncertain global economic picture and a resurgent COVID wave decimating the US caused funds focusing on so-called macro trends to fare the worst, gaining only 1.3 percent in November.

Asset managers appear to have found a renaissance in the pandemic. As The Post reported in October, the industry pulled in more money than it paid out in the third quarter of 2020, the first time hedgies had seen net inflows in more than two years.

According to insiders, it helps that the hedge fund industry is now half the size it was five years ago.

“There’s more money to go around, the trades are less crowded and you can’t lose on this market right now,” mused one hedge fund manager. “It’s been a weird year.”

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