Yet, investors’ reaction have been mixed. While clients have bolstered their investments in multi-strategy hedge funds, they have pulled money from macro strategies to the tune of $26 billion, more than five times the net outflows in 2021. This contrasts with previous years when investors typically chased performance and inflows followed periods of good returns.

Macro hedge funds produced gains by betting on trades benefiting from spiraling inflation and central banks’ response to contain it. Short wagers on bonds and equities were profitable, while long wagers on commodities made money.

“Moving forward, we believe that returns will remain robust but normalize, as easy trades have already been realized by managers,” Preqin analysts wrote in the hedge fund tracker’s annual report.

Meanwhile, business is booming at multi-strategy investments firms that rely on dozens of traders making bets across asset classes.

They have been able to hire the best talent, even luring some well-established managers running their own single strategies with the promise of sticky capital, robust trading infrastructure and fat compensation packages.

Powering the firms’ ability to poach the best traders is the adoption of the so-called pass through fee structure. The fee can cover everything from boosting pay to hiring, to covering rent and even entertainment. While management fees were traditionally set at an annual rate of 2% of assets, the pass-through charge isn’t set and can climb to 10% or more.

Recently, Ahmet Arinc, the former head of foreign exchange trading at Deutsche Bank AG, shut down his hedge fund after four years to join bigger rival ExodusPoint Capital Management with his team.

Stock picker Heron Bay Capital also shut and its investment team led by founder Sean Gambino joined multi-strategy hedge fund peer Eisler Capital. Eisler itself is winding down its first hedge fund and ditched plans to start another fund to focus entirely on its multi-strategy money pool.

Such is the growth in the strategy, multi-strats are on the cusp of taking over equity long/short hedge funds as the most dominant money pools in the industry.

Hedge funds relying on computer-driven algorithms also generally profited from the wild swings in global markets. Soaring volatility and rising rates sparked major trends across fixed income, currencies and commodities market, providing opportunities to the algorithms designed to profit from any sustained rise or fall in asset prices.

“Quant macro strategies can thrive in this environment and make meaningful gains for clients, which has been particularly valuable in a year which has been so challenging for most asset classes,” said Mark Jones, deputy CEO of Man Group Plc that runs some of the biggest such funds. “We’d expect higher macroeconomic volatility to persist into next year and that usually bodes well for these strategies.”

These hedge funds won a big following after their roaring success through the 2008 global financial crisis when they produced double-digit gains as everything else failed. They are staging a comeback from years of mediocre gains amid muted volatility caused by quantitative easing.

The SG Trend Index, which measures returns of some of the largest quant funds in the world rose by almost 26% through Dec. 9, just shy of its best annual gain in 2002. 

Some of the biggest quant funds including Aspect Capital’s Diversified, Man AHL Alpha, Systematica’s BlueTrend and The Winton Fund have produced double-digit gains. The strategy is home of the highest concentration of funds producing returns in excess of 10%, according to data compiled by Preqin.