Hedge funds outperformed S&P 500 in July, says PivotalPath Report

Data from research firm PivotalPath has highlighted that hedge funds outpaced the S&P500 in July, with strong returns driven by financial sector exposure as funds sought to diversify away from megacap technology stocks, according to a report by XM.

The PivotalPath Composite Index, which tracks a wide range of hedge fund strategies, posted a 0.8% gain in July, bringing its outperformance relative to the S&P500 to 5.8% for 2024 so far.

Financial sector investments led the way, with the PivotalPath Equity Sector: Financials Index surging 9.6% in July. In contrast, an index tracking technology, media and telecom stocks recorded a modest 0.8% gain for the month.

PivotalPath analysts noted: "Financials have become attractive for investors seeking reliable dividend payers, especially as the market shifts focus from Artificial Intelligence to more traditional growth drivers."

July was a strong month overall for hedge funds, with all tracked strategies outperforming the benchmark S&P 500.

Over the past 12 months, credit, multi-strategy and global macro strategies have delivered the highest alpha, according to PivotalPath.

However, not all strategies thrived in July. The index tracking global macro commodities was the biggest loser, dropping 2.1% as many managers failed to anticipate the bearish shift in the commodities market.

Meanwhile, hedge funds increased bearish bets on Japanese stocks at the fastest pace in over five years between 2 August and 8 August, according to recent Goldman Sachs data.