Equity and multi-strategy funds helped hedge funds start 2024 on the right foot, recording their best post-pandemic quarter, according to the latest data from Citco, an asset-servicer with over $1.9tn in AUA.
Funds administered by Citco delivered a weighted average return of 7.3% overall in Q1, building on the strong performance seen throughout much of 2023.
Equity funds were the top performers, with a weighted average return of 8.49%, followed by multi-strategy funds at 7.59% and event driven funds at 4.03%. All other strategy types were also positive, with fixed income arbitrage, commodities and global macro funds at 3.49%, 2.75% and 2.58% respectively.
AUA categories were also all in positive territory in Q1. The largest funds with more than $3B of AUA achieved a weighted average return of 8.26%. Returns went in descending order in line with fund sizes in Q1, with funds with AUA between $1bn-$3bn the second-best performers at 6.69%, followed by the $500m-$1bn of AUA category, which came in at 5.15%. Funds with between $200m-$500m of AUA and those with below $200m stood at 4.72% and 3.54% respectively.
Capital flows were negative in Q1, with net outflows of $4.4bn for the quarter. Equities once again saw the most net outflows after seeing redemptions outweigh subscriptions each calendar month throughout Q1. In total, equity strategies had net outflows of $4.1bn, followed by multi-strategy funds at $1.8bn and emerging markets at $0.6bn. However, several strategies saw net inflows in Q1, led by hybrid funds which had net inflows of $1.1bn. Arbitrage funds also saw net inflows of $0.9bn, followed by fund of funds at $0.4bn, and global macro funds which were just positive at $0.1bn.
The quarter saw record trading volumes, eclipsing the high we witnessed in the final quarter of 2023. While activity has been largely driven by high-frequency trading strategies resulting in significant trading volume in equities and equity swaps, there was also sustained interest in fixed income products and derivatives on commodities, rates, and indices.
Treasury payment volumes set a new quarterly record high in Q1 amid positive signs for the US economy. The total number of treasury payments came in at 141,806, just ahead of Q4’s previous record of 140,665, and some 17% ahead of Q1 2023.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland), said: “Rallying stocks and record prices of some core commodities have helped get 2024 off to a flying start in terms of hedge fund performance.
“Hedge funds administered by Citco have now seen six consecutive quarters of positive returns, and while strategies go in and out of favour, as we start 2024 there is a real breadth to those returns, with all strategy types in the green for Q1.
“A new narrative has emerged so far this year whereby stronger economic growth – and not the prospect of rate cuts – has taken centre stage. While investors will not be complacent, there remain multiple opportunities out there for hedge fund managers, even after the gains we have seen year-to-date.”
