HEDGE FUNDS: Equity and multi-strategy hedge funds lead Q1 2024 recovery

Hedge funds kicked off 2024 with their “best quarter since the pandemic”, according to data from the Citco group of companies.

Equity and multi-strategy funds led the charge, with a weighted average return of 7.3% across all strategies, building on 2023’s momentum. Equity funds topped the charts at 8.49%, followed by multi-strategy at 7.59% and event-driven at 4.03%. Other strategies like fixed income arbitrage, commodities and global macro also posted positive returns.

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Asset under Administration (AuA) categories showed positive results, with the largest funds over $3B AuA returning 8.26%. Returns decreased with fund size, with funds between $1B-$3B and $500M-$1B AuA returning 6.69% and 5.15% respectively. Funds with $200M-$500M and below $200M AuA returned 4.72% and 3.54%.

Despite the positive returns, Q1 saw net outflows of $4.4B, driven by equity strategies with outflows of $4.1B. Multi-strategy funds and emerging markets also experienced outflows. However, hybrid funds led inflows at $1.1B, followed by arbitrage, fund of funds and global macro with smaller inflows.
The data providers observed record trading volumes, driven by high-frequency trading in equities and derivatives, alongside sustained interest in fixed income and commodities. Treasury payment volumes hit a new high at 141,806 transactions, up 17% from Q1 2023, reflecting positive economic signs for the US.

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Declan Quilligan, head of hedge fund services, Citco Fund Services (Ireland) Limited, commented: “Rallying stocks and record prices of some core commodities have helped get 2024 off to a flying start in 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 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,” added Quilligan.