Hedge fund returns held up well in the face of ongoing downward trends for some markets in the third quarter, seeing only a small decline overall, with some specific strategies recording strong gains, according to data from Citco.
• Hedge funds see overall weighted average return of -0.63% in Q3, a marked improvement on Q2’s -6.81%
• Global macro funds were the best performers at 4.06%
• Over half of all hedge funds see positive returns over the quarter
Hedge fund returns held up well in the face of ongoing downward trends for some markets in the third quarter, seeing only a small decline overall, with some specific strategies recording strong gains, according to data from Citco.
Citco’s 2022 Q3 Hedge Fund Report reveals that the overall weighted average return from funds it administers was -0.63% in Q3, a significant improvement on the second quarter average return of -6.81%.
Over half (50.83%) of all funds administered by Citco delivered a positive weighted average return, a marked improvement on the third (32.81%) that ended Q2 in positive territory, with strong returns from global macro strategies (4.06%), and event driven and commodities funds – 3.66% and 2.99% respectively – all contributing positively.
Capital flows were once again negative, with net redemptions from Citco administered funds totalling $9 billion. Q3 gross subscriptions into Citco administered funds totalled $30.4 billion, but that figure was outweighed by gross redemptions of $39.4 billion, despite two intra-quarter months of net subscriptions once again.
On an AUA basis, the largest funds also saw the highest redemptions and the second-worst performance.
Having set a record in Q2, trade volumes broke new ground once again in Q3, with overall volumes hitting the highest level ever on record, and 23.7% higher than the same quarter in 2021. The shift in the asset classes favoured by managers which began in Q2 continued last quarter, with increases seen in equity and index derivatives, commodity futures and futures on interest rates.
With interest rates having risen globally throughout the year, the treasury space has also grown significantly in importance. Each quarter has seen an increase in the volume of transactions, and Q3 marked yet another record-breaking period, with average volumes up 36% year-on-year to almost 120,000 transactions.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd, said: “Amid ongoing falls in certain areas, such as equity and bond markets, hedge funds saw only a small dip overall, with several strategy types achieving positive returns.
“As they adapt to this new market environment and seek out alternative investment markets to provide them with a different source of potential returns, we expect end investors to continue to turn to hedge funds in increasing numbers.”
Key Takeaway | Hedge funds saw a marked improvement in returns in Q3, once again demonstrating their value as a portfolio diversifier
