Q3 2021 Hedge Fund Industry Data

Late summer brought the severe spread of the Delta variant, which tempered consumer spending and exacerbated already crippled global supply chains. At the same time, inflation prints continued to remain stubbornly high, leading to early skepticism of the Fed's "transitory" stance. Internationally, the massive Chinese property developer Evergrande teetered on the brink of default, sparking intense, albeit brief, fears of a global "Lehman moment" emanating from the Asian credit markets.

The OFR and FSOC paid extraordinarily close attention to the unfolding Evergrande crisis. They rigorously tracked cross-border exposures to assess if Western hedge funds and prime brokers held direct concentrated vulnerabilities to Chinese real estate debt. Domestically, the SEC formally proposed new rules demanding that hedge funds report significant loss events or massive margin requirements within 72 hours, rather than quarterly.

The industry entered Q4 with a notable degree of exhaustion. The easy gains of the post-COVID rebound were over. As supply chain woes became entrenched and energy prices began to spike severely into winter, macro funds prepared for a transition toward tighter monetary policy, firmly believing the Fed would be forced to capitulate on inflation.