HFs on Right Side of July Equity Meltdown — Evening Brief – 08.28.24
Stock-picking hedge funds generated positive returns for clients amid the turbulent market conditions witnessed in July by increasing their short positions against chipmakers vulnerable to artificial intelligence, new industry data showed.
Equity hedge funds achieved a monthly return of 2.6% and have already notched a 10.3% increase from the beginning of January, putting them in double-digit territory on a year-to-date basis. according to analysis by PivotalPath.
Equity-diversified managers experienced a return of 1.3% while computer-based quantitative equity strategies had a return of 0.2% during the stock market decline. Meanwhile, credit-focused hedge funds experienced a 1% increase, while large multi-strategy managers contributed 0.3%. The rapid market reversal caught CTAs and trend-following funds off guard, however, resulting in a 1.7% decline. Global macro strategies suffered a 0.4% decline.
PivotalPath’s main industry composite index increased by 0.8%, bringing it to 6.8% for the seven-month period ending in 2024. The average monthly return for hedge funds making gains in July was 2.28%, while the average loss for those in negative territory was 2.66%.
The hedge fund research and intelligence provider discovered that roughly two-thirds (65%) of all hedge funds it monitors ended July in positive territory, as many managers correctly positioned for a tech-driven drawdown that saw the sustained first-half equities rally come to a halt, with the S&P 500 rising 1.2% and the Nasdaq falling 0.75%.
Hedge funds had been piling up negative bets against semiconductor makers all month, capitalizing on the market meltdown that left AI-related tech stocks, such as Nvidia, Alphabet, Microsoft, Apple, and Tesla, suffering severe losses before recovering in August.
PivotalPath tracks the monthly performances of more than 2,800 institutionally relevant hedge funds, spanning over $2.5 trillion of industry assets, on behalf of over $300 billion in client hedge fund capital.