Systematic hedge funds pummeled in post-U.S. CPI stocks rally – Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) – Global hedge funds that use algorithms to trade suffered their second worst single day this year on Tuesday, as softer than expected U.S. inflation numbers sparked a hefty stocks rally, a Goldman Sachs note showed.

Systematic traders making long and short equities bets were down 1.2% on the day but are still on average up 14% for the year to November 14, said the note written that day but shared with Reuters this week.

The worst trading day for these hedge funds was in late August, the note showed, adding no additional information for the reason or an exact date.

Tuesday’s U.S. inflation data for October sparked the biggest daily percentage gains in the S&P 500 and Nasdaq stock indices since late April.

Stockpicking hedge funds that actively chose bets managed to gain 0.6% on Tuesday and are now poised for their best month since January this year, said Goldman Sachs.

These hedge funds posted a positive 2.7% performance for the month to November 14 and up were up 5.8% for the year so far, the Goldman note added.

All hedge fund strategies as a group were down on average 0.58% in October, and up 3.75% for the year to end-October, a separate BNP Paribas note to investors on November 14 showed.

MSCI’s broadest world stock index ended October down 2.88%.

Quantitative multi-strategy hedge funds have been the best performing strategies so far this year, with an 11.05% positive performance to end-October, said BNP Paribas.

Hedge funds which trade on market volatility bear the lowest average of a 2.46% gain for the year to the end of October, said the French bank.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Chizu Nomiyama)