Hedge funds staged a strong recovery in August, with commodity and global macro strategies leading performance as industry inflows for the year moved to within touching distance of $100bn, according to Citco lates Monthly Hedge Fund Update.
The weighted average return across funds administered by Citco rose 1.4% in August, with more than three-quarters of funds generating positive returns. The rebound lifted the weighted average return for the year to date to 11.3%, following a weaker performance in July.
Commodities were the strongest-performing strategy, producing a 4.2% weighted average return for the month, while global macro funds returned 3.9%. Equity strategies gained 2.2%, followed by multi-strategy funds at 0.7% and fixed income arbitrage at 0.5%.
Event-driven strategies were the sole category tracked by Citco to post a negative return in August, declining 1.9%.
Performance was positive across every fund-size category. Funds with between $500m and $1bn in assets under administration generated the highest weighted average return at 2.6%, followed by funds with $200m to $500m at 2%. The other size categories all recorded average gains of more than 1%.
The dispersion between the strongest and weakest-performing funds also narrowed during the month, with the gap falling to 8% from 9.9% in July.
At the same time, investor demand for hedge funds continued to build. Net inflows reached $10.3bn in August, taking cumulative inflows for 2026 to $99.7bn. That is already substantially above the $62.2bn recorded for the whole of 2025, according to Citco.
Multi-strategy funds remained the main destination for new capital, attracting $6.7bn during August and bringing their year-to-date inflows to $57.1bn. Equity, fund of funds and hybrid strategies each recorded approximately $1bn of net inflows, while arbitrage funds attracted $800m.
Investor appetite was also concentrated among the industry’s largest managers. Funds with more than $10bn in AUA received $7.9bn of net inflows in August and have accounted for $77bn of cumulative inflows since the start of the year. Funds below $1bn attracted $1bn during the month, compared with $900m for funds between $1bn and $5bn and $500m for the $5bn to $10bn category.
Europe and the Americas accounted for virtually all of the regional inflows in August. European hedge funds attracted $5.3bn, while funds in the Americas received $5.1bn. Asian funds, by contrast, recorded a $100m net outflow.
Trading activity eased from July’s levels, although it remained above the comparable period last year. Average daily trade volumes processed by Citco fell 5.9% month-on-month in August but were still 2.5% higher than in August 2025.
Equity swaps and equities remained the largest contributors to trading volumes, despite their daily averages falling 11% and 4%, respectively, from July. Commodity futures options provided a counterweight, with volumes more than doubling month-on-month, while equity options and commodity futures increased by 12% and 9%. Citco said market volatility remained subdued, with the VIX declining by two points from July.
The operational data also pointed to continued demand for outsourced infrastructure. Citco’s middle-office team processed 62,700 treasury payments during August, down from July’s record 74,303 but 14% above August 2025. The company said the third quarter was on track to establish another quarterly record for treasury payment volumes, reflecting the increasing complexity of the function and hedge funds’ use of third parties for non-core operations.
Citco’s trade-ingestion infrastructure recorded a 97.1% straight-through-processing rate during August, according to the report.
