Hedge Fund Strategies Performance in Bad Market Condition Analysis

Abstract

In this article, the performance of hedge fund strategies is measured and analyzed by the following aspects: potential risk of the strategies excepted return of selected hedge fund and the sample performance in pressured stock market conditions. The study will provide theoretical explanations of the efficacy of Merger Arbitrage, Mutual Fund strategies, and PE ratio-related hedge fund strategies and their profitability as well as risk tolerance. Throughout equity data collection, asset markets including the S&P and NASDAQ have experienced downward pressure on systemic risk caused by inflation combined with quantitative tightening. These Macro factors have significantly contributed to the effectiveness of hedge portfolios; therefore, the article will focus on the performance of hedge fund strategies in the current market and analyze the efficiency of the strategies. According to the real-time hedge strategy trading data obtained from May/21st/2022 to July/01/2022, the Market Mutual strategy, as well as the Merger arbitrage, displayed the risk-averse characteristics of the hedging strategy during the underperforming period. On the other hand, P/E-based trades took on more systematic risk, which generated additional losses than expected.