The global hedge fund industry saw positive net inflows of USD6 billion in Q3 amid increasing volatility, totaling net inflows of USD23.7 billion in the first nine months of 2021, according to data from the Citco group of companies (Citco), the asset servicer with USD1.6 trillion in assets under administration (AuA).
The global hedge fund industry saw positive net inflows of USD6 billion in Q3 amid increasing volatility, totaling net inflows of USD23.7 billion in the first nine months of 2021, according to data from the Citco group of companies (Citco), the asset servicer with USD1.6 trillion in assets under administration (AuA).
Analysing global hedge fund industry performance patterns, trade and treasury volumes, and investor flow trends – Citco’s Q3 2021 Hedge Fund Report (attached) found that all hedge fund strategies and most AuA categories on the Citco platform delivered positive returns in Q3. While the quarter showed relatively good hedge fund performance, it was nonetheless a departure from Q1 and Q2: funds on the platform delivered a 1.15 per cent overall weighted average return in Q3, versus 8.25 per cent and 6 per cent in Q1 and Q2 respectively.
Event driven was the best performing strategy, delivering a weighted average return of 6.46 per cent, while Multi-strategy was the worst, with a 0.39 per cent return. Continuing the trend from the previous quarter, larger funds with over USD3 billion of assets produced the highest returns, with an average of 1.57 per cent in Q3.
For the second quarter in a row, Citco observed a strong correlation between volatility and trading volumes. Despite a relatively quiet July, Q3 volumes were the second busiest on record after Q1 2021 as a result of a sharp spike in volatility in September. Equity and Equity Swaps continued to be the most traded asset classes in Q3, but there was a 36 per cent increase in Fixed Income products, Credit Default Swaps and Interest Rate Swaps in September, indicating a broader use of this product group among hedge funds.
Treasury volumes continued to hit all-time highs, increasing 44 per cent year on year in Q3, with an average of over 30,000 payments in July, August and September.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd, says: “Despite significant volatility in September, global hedge funds have demonstrated their resilience to achieve positive returns across asset classes, fund strategies and geographies. Net positive inflows to Citco funds and heightened trade volumes have increased the need for Citco’s streamlined, digitised and transparent treasury and accounts payable workflows, which are more important than ever to provide asset managers with the tools they need to grow.”
