Hedge Fund Strategy Outlook Q1 2022


As we commence 2022, the prospect of a reduction of global liquidity provided by major central banks has increased volatility in the traditional equity and fixed income markets. To complicate matters, inflationary pressures have been building and may not prove to be as “transitory” as once thought. Investors are looking to hedge funds to reduce volatility and increase flexibility in their overall portfolio, giving them optionality as markets transition to a new regime.

Strategy Highlights

Relative value

Observed continuing increase in dispersion within and across asset classes indicative of a potential increase in fundamental and macro risks and is favorable for less directional relative value strategies.

Global macro

A shift in policy regime may create market opportunities for managers focused on macro factors. Managers with a tactical trading approach may benefit from higher realized volatility across asset classes.


The major unknown is the Omicron variant and the subsequent impact on demand going forward, particularly in the energy sector. This should provide a rich opportunity set on both the long and short sides for active commodity traders.


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The K2 Investment Research & Management (IRM) Outlook Scores are the opinions of the K2 IRM group as of the date indicated and may not reflect the views of other groups within K2 or Franklin Templeton. Scores are determined relative to other hedge fund strategies and do not represent an opinion regarding absolute expected future performance or risk of any strategy or substrategy. Scores are determined by the K2 IRM group based on a variety of factors deemed relevant to the analyst(s) covering the strategy or substrategy and may change from time to time in K2's sole discretion.

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