Hedge funds largely in the green
On average, hedge funds administered by Citco returned 3% for July, recouping some of their year-to-date losses following weighted average returns of -2.4% for June and -1.1% for May. The median return displayed a sizable dispersion at 1.1%. About 70% of the funds Citco administers generated positive returns in July, compared to only 28.5% of funds in June.
While commodities hedge funds were the strongest performers earlier this year, the strategy was the only one in the red for July, with an average weighted return of -0.7%. On the other hand, multi-strategy funds led the way in July with a weighted average return of 4.4%. Equities came in second at 3%, followed by fixed-income arbitrage at 1.8%.On a median basis, commodities hedge funds were flat, while multi-strategy, the best-performing strategy on a weighted-average basis, recorded the second-worst median return at 0.2%. The strategy with the best median return was equities at 3.4%, followed by fixed-income arbitrage at 2.3%.
Fund returns by size
The largest hedge funds administered by Citco outperformed their smaller peers with a weighted average return of 4.3% for funds with over $3 billion in assets under administration. The second-place size category was funds with $200 million to $500 million, which trailed far behind first place with a return of 2.3%.
However, the rest of the size categories generated similar returns at 1.7% for funds with less than $200 million under administration and 1.9% for funds with $1 billion to $3 billion. On a median basis, the $200 million to $500 million size category generated the strongest return at 1.9%, not much below its weighted average return.
Funds with over $3 billion in assets generated a median return of 1.6%, a sizable difference from their weighted average return, demonstrating a wide dispersion in returns among funds of that size. Overall, the outperformance of larger funds compared to smaller ones was also demonstrated by the wide dispersion between the overall weighted average return of 3% and the median return of 1.1%.Inflows and outflows were small in July
Funds administered by Citco saw only minuscule net inflows in July, marking a reversal from June.
Those with $1 billion to $5 billion under administration recorded the highest net inflows at $2.7 billion, followed by funds with less than $1 billion with $200 million in net inflows. On the other hand, funds with more than $10 billion recorded net outflows of $1.6 billion, while those with $5 billion to $10 billion saw outflows of $100 million.
All strategies saw small net inflows or outflows. The strategies that racked up the most inflows were hybrid and global macro, each of which captured $700 million in inflows. Equities recorded the most net redemptions at $700 million.
Regionally, funds focused on the Americas saw $2.1 billion in inflows, while Asia- and Europe-focused funds recorded net redemptions of $500 million and $400 million, respectively.
Looking ahead, Citco sees $13.5 billion in net redemptions set for the end of the third quarter and $8.2 billion for dates beyond the third quarter.
A busy July for trading activity
Usually, July and August are quieter months in terms of capital activity, but last month was another busy trading cycle. Even though July was busy, the firm said volumes were somewhat muted compared to previous months.
Last month saw the highest daily average trade volume on record for its companies, with a 2% month-over-month increase. Total July volume was 38% higher than July 2021, marking a significant departure from the norm.
Volatility fell steadily throughout the month, hitting its lowest point on the last trading day. Citco also observed a steady increase in trading activity alongside the declining volatility.
The firm said growing interest in digital assets from a small number of managers further amplified the heightened activity in July. Equities, currency cross-rates and interest rate futures saw higher volumes across most managers. There was also 58% increase in equity options and a 77% increase in index options.
The firm has also seen a steady increase in Treasury volumes year to date.
Michelle Jones contributed to this report.