Hedge Funds Extend Winning Streak in August
Over two-thirds of hedge funds produced positive returns for investors in August, with the industry approaching double-digit year-to-date gains in 2024, according to Citco.
The percentage of hedge funds in the black rose to over 68% in August, up from 64% in July, as managers posted their fourth straight monthly gain. According to data from the global alternative investment asset servicer, hedge funds are currently up 9.5% on average over the eight months from the beginning of January, following a 1.1% increase in August.
The most successful strategies were equity-focused, with a monthly return of 1.7%. Global macro funds followed, seeing a 1.4% increase. Multi-strategy funds experienced a 0.7% increase, while fixed income arbitrage contributed 0.9%.
The analysis revealed a significant increase in trading activity as hedge funds navigated the volatility rise that occurred at the beginning of the month. The total number of transactions processed also reached a new record, while daily average trading volumes increased by 7.9% month-over-month.
Stock-pickers effectively navigated the August disruption, with equities and equity swaps accounting for 61% of the overall volume. Additionally, there were substantial increases in index derivatives and interest rate-linked derivatives.
“Much of this activity came during the opening week of August when there was a remarkable surge in trading volumes,” Citco observed in its latest Monthly Hedge Fund Update.
“As volatility soared, a substantial increase in trading volumes was observed across all managers and all strategies, with total volumes up four to fivefold on average over three days, peaking on August 5. Notably, index futures and other interest rate and index derivatives saw a day-over-day increase of over 200% in this window.”
In August, hedge funds continued to draw investor capital, with year-to-date inflows into the industry now totaling $9.31 billion. Hedge funds experienced a $2.3 billion net inflow, as allocators’ $9.8 billion of new subscriptions exceeded $7.5 billion of redemptions.
In contrast, global macro hedge funds experienced a net $1.2 billion outflow from allocators, while most other strategies remained flat or near flat for the month. Equities, emerging markets, event-driven, and fund of funds strategies all experienced modest net outflows of approximately $100 million.