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Equity strategies lead double-digit 2023 hedge fund gains

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Hedge funds achieved double-digit returns in 2023, led by equity strategies with a weighted average return of 21.91%, according to research from asset servicer Citco, which has over $1.8tn in assets under administration (AUA).

Funds administered by Citco achieved a weighted average return of 14.66% for 2023 – a stark contrast to the previous year’s figure of -7.02% – as a number of strategy types rebounded from a tougher 2022. In total, 80% of funds achieved positive returns for the year.

As well as equities, fixed income arbitrage (12.91%) and multi-strategy funds (12.56%) were the standout performers. Event driven funds, meanwhile, achieved a weighted average return of 7.96%, while global macro funds just stayed in positive territory at 0.78%.

In a reversal of 2022, commodities strategies were the worst performer. They were the only grouping to have a negative return in 2023, with a weighted average return of -4.17%, although this followed a 20.43% gain in 2022.

On an AUA basis, the largest funds with more than $10bn of AUA went from the worst performers the previous year to the best in 2023, with a weighted average return of 17.41%.

Investors and allocators reduced positions in hedge funds throughout 2023, with net outflows of $47.2bn in total.

From a trading volume perspective, Citco processed more trades than ever before in 2023, breaking the record set the previous year due to a very active Q1 and Q4 which were well ahead in terms of trading activity on a year-on-year (YoY) basis. As well as increases in equities and swaps trading, sustained interest in futures on rates, commodities and currencies also drove activity to a new peak.

Treasury payments set yet another new record in 2023, continuing the trend set in preceding years, although the annual growth rate dipped versus 2022. With interest rates in the US climbing further during the year to reach the highest level for more than two decades, there was an 11% YoY increase in treasury volumes.

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