Hedge Funds Hit Worst Losses Since Liberation Day
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- JPMorgan said hedge funds have seen their worst drawdowns since "Liberation Day" — Trump's April 2025 tariff rollout — with the MSCI World Index falling over 3% and the U.S. dollar index strengthening roughly 2% since the war began on Feb. 28.
- Long/short equity funds are among the worst performers, down about 3.4% in March compared with a roughly 2.2% drop for the hedge fund industry overall, according to Hedge Fund Research data.
- Global macro and CTAs — strategies that typically profit from rising volatility — are also down around 3%, a breakdown of normal correlations that Agecroft Partners' Don Steinbrugge called "surprising."
- JPMorgan strategists led by Nikolaos Panigirtzoglou said the oil shock differs from past cycles: disruptions to tanker traffic through the Strait of Hormuz are interrupting the typical recycling of oil-exporter revenues back into global financial markets.
- Large multi-strategy platforms have held up better than more directional funds because they tend to carry less market exposure, Steinbrugge said.
- HFR President Ken Heinz captured the mood across the industry: "right now, we're all oil traders," while AdvisorShares CEO Noah Hamman warned that investor redemptions could pick up if geopolitical risks continue.
- The losses are a sharp reversal from 2025, when hedge funds posted their biggest annual gain in 16 years.
Why it matters: When even volatility-friendly strategies like global macro and CTAs are losing ~3%, traditional diversification has stopped working — an unusual signal that the oil shock is breaking normal market plumbing. Crowded bets against the dollar and in emerging markets are unwinding fast, and if Strait of Hormuz disruptions persist, the recycling of petrodollars into global markets stays broken, potentially triggering fund redemptions.
