Hedge funds deliver mixed September results on AI swings

By Anirban Sen and Summer Zhen

HONG KONG/NEW YORK, Oct 2 (Reuters) - Global hedge funds delivered mixed results in September after surging bond yields, higher oil prices and swings in AI shares drove selling, although some strategies led to gains, according to prime brokerage notes and investors.

Global fundamental equity long-short funds on average lost 0.55% last month, Goldman Sachs Prime Services team said in a note, although they outperformed the MSCI World Index .MIWO00000PUS, which fell 1.3%.

In contrast, computer-driven systematic equity long-short funds rose 3.46% last month, marking their best monthly performance this year, according to Goldman Sachs.

Central bank headlines dominated September. The US Federal Reserve raised interest rates for the first time since 2023 and signalled more rate hikes in coming months. The US-Israeli war on Iran pushed oil prices higher and sent US Treasury yields to two-decade highs.

AI SWINGS COMPLICATE SHORT-TERM TRADES

Expectations of a slowdown in AI spending also triggered swings in crowded technology positions from the US to South Korea, complicating short-term trading.

In the US, hedge funds sold most sectors in September, but divergence emerged within the tech sector where electronic equipment and hardware were sold off, while semiconductor equipment and software attracted strong inflows, Goldman Sachs said.

In Asia, Morgan Stanley said economic uncertainty limited hedge fund performance in September. The bank estimated Asian hedge funds across strategies fell 0.6% last month through September 25, compared with a 0.2% decline globally.

Some strategies profited from the sharp moves in commodities and rates.

Bridgewater Associates' Pure Alpha macro fund returned 18.4% in the first nine months of the year, Reuters reported.

Trend-following hedge funds were among the biggest winners in September with the Société Générale trend index gaining more than 4%.

Short fixed income and long energy positions largely drove the gain, according to Winton Group.

Analysts said the rate-hiking environment could create greater divergence across the hedge fund industry.

"Some benefit directly from higher short-term rates, while others face higher financing costs that can materially reduce returns," said Don Steinbrugge, CEO at Agecroft Partners.

Here are some of ​the monthly and YTD returns: