By Maiya Keidan

TORONTO, (Reuters) – November’s worst performance for global hedge funds since the first time that the COVID-19 pandemic hit the economies was due to Omicron-fueled market swings.

Early data from PivotalPath shows that Hedge Funds are expected to be down 1.6% to 2 % in November. This is their worst month performance since March 2020.

These potential losses could be a setback to what has been an excellent year of performance. Data from HedgeFund Research (HFR), showed that the average hedge fund has increased 11.4% over 10 months. This compares with 11.8% in 2018 and 10.5% for 2019.

The losses are “quite widespread”, said Robert Sears, chief investment officer of London-based Capital Generation Partners, which invests in hedge funds. Although some of our managers had some positive performances, I believe that overall it will be lower for all of us.

The fell 3.9% from its record high in November as Omicron worries hit stocks in the month’s final days, and notched a nearly 1% loss for the month as a whole. Some areas of the market, however, were harder hit, with the S&P’s energy sector losing 6.2% last month and financials losing 5.9%.

Volatility also increased across all asset classes in November, due to uncertainty about Federal Reserve Monetary Policy driving swings both in stock and bond markets.

Some equity-focused funds were wrongfooted by market swings, and suffered losses from bearish bets on stocks that unintentionally rebounded.

Jean Baptiste Berthon is a senior strategist with Lyxor Asset Management in Paris, an investment firm that invests in hedge funds. He stated that European and U.S. long short strategies experienced losses of around 1.5% to 2.2% between Dec. 1 and Nov. 25.

Shares Moderna For example (NASDAQ:), which Sears claimed some hedge funds had beent against, rose 30% between Nov. 18-Nov. 30. According to S3 Partners data, the short interest in Moderna was 4.1% of its float prior to Nov. 18.

Berthon said that computers-driven trend-following Hedge funds suffered an “important” drop in performance between Nov. 25-Dec. 1. This was due to losses in fixed-income, commodities, and equities. It created a “perfect Storm”.

He said that so-called “macro” hedge funds which place bets on macroeconomic trends lost close to 2%. This was mainly due to bond positioning. However, merger-arbitrage, which call on deals, had marginally increased.

Berthon indicated that hedge funds may reduce risk to protect returns after a strong year.

He said that funds are unlikely to try to make heroes now, three weeks before the close of the year.