Hedge Funds Hit a Snag in June — Evening Brief – 07.26.24
Global hedge fund assets increased for the seventh quarter in a row in the second quarter of 2024, surpassing the previous record high of $4.3 trillion to reach $4.31 trillion, representing an increase of approximately $11 billion, according to the most recent data from Hedge Fund Research (HFR).
Hedge funds gained about 5% in the first half of 2024, but recent political concerns led to uneven performances in June, with long/short equities strategies posting muted gains and macro managers losing further momentum.
Hedge funds lost an average of 0.20% in June, according to HFR’s Fund Weighted Composite Index. Longer term, HFR’s benchmark, which measures more than 1,400 single manager hedge funds across all strategies, increased 4.97% between the beginning of January and the end of June.
HFR stated that a volatile political environment harmed the performance of various hedge fund strategies, resulting in uneven results as the first half finished. Overall, about 55% of all hedge funds tracked by HFR generated positive returns in June, a dramatic decrease from 70% in May.
Equity-focused hedge funds had moderate gains in June, up 0.30%, bringing their first half returns to 6.29%. As a result, stock-picking strategies are now the best-performing hedge fund sub-strategy in 2024, surpassing macro managers, who lost 1.65% last month but are up 5.13% over the past six months.
While the US large cap tech sector continues to grow, HFR president Kenneth Heinz said that “potentially destabilizing” policy shifts and dislocations would cast doubt over global currencies, commodities, and bonds. He cited the ongoing electoral instability in France, as well as the extreme left-right division in the U.S. and Europe throughout 2024.
Looking further, quantitative directional equity strategies headed the way with a solid monthly return of 3.84%, followed by tech-focused managers who added 2.64%. Equity market-neutral and healthcare specialist strategies both gained more than 1%, but energy- and multi-strategy-focused equity funds shed 1.88% and 0.85%, respectively.
Meanwhile, macro hedge funds posted their second straight monthly loss in June. After falling 0.30% in May, the sector — which trades macroeconomic trends through equities, bonds, currencies, commodities, and other assets – fell 1.65% in June. Longer term, macro hedge funds’ 2024 performance is strong: systematic diversified strategies are up 7.48% from the start of the year, while commodities, active trading, and discretionary themed funds are up more than 3%. Overall, the sector is up 5.13% year to date.
In June, the difference between winners and losers narrowed. The top decile of HFR’s Fund Weighted Composite Index constituents gained an average of 5.4%, while the bottom decile declined by an average of 5.7%, yielding a top-to-bottom dispersion of 11.1% for the month, down from 12.4% in May.