War in the Middle East, hedge funds under pressure: billion-dollar losses

The new wave of volatility in global markets, triggered by the military escalation against Iran, has also hit some of the world’s largest hedge funds hard, firms traditionally known for the stability of their returns. In the week ending March 6, several major managers recorded significant losses due to a broad sell-off in equities, bonds and other asset classes.

Among the hardest hit is Millennium Management, which reportedly lost about $1.5 billion, equal to 1.7% of its most recently reported assets. The decline effectively wiped out most of the 2% gain the firm had accumulated in the first two months of the year. Balyasny Asset Management also suffered a sharp setback, with a drop of 3.5%, while Point72 Asset Management posted a weekly loss of 1.1%, reducing its year-to-date gain to 3.4%.

The turbulence in the markets began after the raids launched on February 28 by the United States and Israel against strategic targets and command centers in Iran. Geopolitical tensions temporarily pushed the price of oil close to $120 per barrel, before a partial pullback following statements by U.S. President Donald Trump, who said the conflict could end “very soon.”

In addition to geopolitical tensions, investor sentiment was also weighed down by a disappointing U.S. employment report and renewed concerns about the private credit sector. Another key factor was the sharp movement in the British government bond market: expectations regarding the Bank of England’s policy were quickly revised, and the yield on two-year gilts jumped by about 35 basis points in just a few days, marking the worst week in more than three years.

The environment also represents a challenge for highly diversified multi-asset strategies such as those adopted by Millennium, which employs more than 330 trading teams. In 2024, major hedge funds had posted very strong results: Millennium closed the year with a return of 10.5%, while Balyasny and Point72 recorded +16.7% and +17.5% respectively. The current phase of turbulence, however, shows how quickly geopolitical shocks can put pressure even on the most sophisticated managers in the industry.

Andrea Pelucchi