Hedge funds have struggled a lot in recent years, as performance has been muted and excessive fees collected by firms have dulled their demand. Last year, hedge funds delivered broad-based annual returns of 10.3%, per the benchmark HFRI Fund Weighted Composite Index from Hedge Fund Research, as quoted on Yahoo Finance. The S&P 500 returned nearly 27% over the same period.

But 2022 has been different for defensive ETFs like hedge funds as the year has been disastrous for Wall Street. Super-hot inflation, rising rates, supply-chain issues, the Russia-Ukraine war, the oil price rally and, last but not least, coronavirus fear – all contributed to the market slump this year. As a result, investors flocked to defensive ETFs like hedge funds.  

Citadel is on pace for its most profitable run ever. Its flagship Wellington fund reportedly gained 32% this year through November, while the S&P 500 was down more than 14% over the same period. The firm is expected to return about $7 billion in profits to its investors this year, the Yahoo Finance article reported. The D. E. Shaw Group and Millennium Management are also likely to deliver double-digit annual returns, gaining 23% and 10%, respectively, as of the end of November.

HFR's weighted composite index, a global, equal-weighted index of the largest hedge funds that report to the firm's database, saw hedge funds down just 2.62% this year as of November against a 14.39% drop for the S&P 500 over that same period.

Against this backdrop, below, we highlight a few winning hedge funds of the year.

ETFs in Focus

Simplify Interest Rate Hedge ETF (PFIX Quick QuotePFIX - Free Report) – Up 85.5% YTD

The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and to benefit from market stress when fixed-income volatility increases, while providing the potential for income. The fund charges 50 bps in fees.

Advocate Rising Rate Hedge ETF – Up 34.1% YTD

The Advocate Rising Rate Hedge ETF is a multi-asset ETF that seeks to generate capital appreciation during periods of rising long-term interest rates, specifically interest rates with maturities of five years or longer. The fund charges 85 bps in fees.

iMGP DBi Managed Futures Strategy ETF (DBMF Quick QuoteDBMF - Free Report) – Up 20.7%

The fund seeks long-term capital appreciation. The fund will employ long and short positions in derivatives, primarily futures contracts and forward contracts, across broad asset classes of equities, fixed income, currencies and commodities. The fund charges 85 bps in fees and yields 8.60% annually.

SPDR SSgA Multi-Asset Real Return ETF (RLY Quick QuoteRLY - Free Report) – Up 8.3%

The SPDR SSgA Multi-Asset Real Return ETF seeks to achieve real return consisting of capital appreciation and current income. The fund looks to provide exposure to inflation-protected securities issued domestically and internationally, domestic and international real estate securities, commodities, and publicly traded companies in natural resources or commodity businesses. These companies may include agriculture, energy, and metals and mining companies. The fund charges 50 bps in fees and yields 16.23% annually.

First Trust Managed Futures Strategy Fund (FMF Quick QuoteFMF - Free Report) – Up 5.6%

The First Trust Managed Futures Strategy ETF is an actively managed exchange-traded fund that seeks to achieve positive total returns that are not directly correlated to broad market equity or fixed-income returns. The fund charges 96 bps in fees.