Funds of hedge funds had a positive first half of the year, with the average fund returning 2.87% to the end of June, amid a broad resurgence for the asset class, according to the latest Fund of Hedge Fund Update from alternative investment asset servicer Citco.
Some 82% of funds delivered positive returns in the first half of 2023 - versus just 35% in the first half of 2022 and 43% for the full year 2022.
Equity long/short funds of hedge funds were the top performing strategy type, delivering the highest weighted average return of 4.79%, followed by multi-strategy at 3.55%, and convertible arbitrage at 2.88%.
On an AUA basis, funds of all sizes achieved positive performance in the first half of the year. Smaller funds with less than $100m AUM were the top performers, with an average weighted return of 3.38%.
Broadly invested funds of hedge funds strategies with 30-50 underlying positions performed the best, with an average return of 5.18%, while funds with between 20-30 holdings saw the lowest average return of 1.29%, indicating that diversification brings reward.
Capital flows improved significantly from 2022, with the larger funds managing more than $1bn of AUM seeing net inflows.
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