- Funds delivered a weighted average return of 14.66% last year
- Majority of strategies see gains, with 80% of all funds seeing positive returns
- Equities the top-performer for 2023
London, January 31 2024 – Hedge funds achieved double-digit returns in 2023, led by Equity strategies, according to research from the Citco group of companies (“Citco”), the asset servicer with over $1.8 trillion in assets under administration (AUA).
Q4 2023 hedge fund letters, conferences and more
Funds administered by Citco achieved a weighted average return of 14.66% for 2023 – a stark contrast to the previous year’s figure of -7.02% – as a number of strategy types rebounded from a tougher 2022. In total, 80% of funds achieved positive returns for the year.
Equities, Fixed Income Arbitrage and Multi-Strategy funds were the standout performers, all delivering double-digit returns. Equities led the way, with a weighted average return of 21.91% for 2023, followed by Fixed Income Arbitrage at 12.63%, and Multi-Strategy at 12.56%.
Event Driven funds achieved a weighted average return of 7.96%, while Global Macro funds just stayed in positive territory at 0.78%.
In a reversal of 2022, Commodities strategies were the worst performer. They were the only grouping to have a negative return in 2023, with a weighted average return of -4.17%, although this followed a 20.43% gain in 2022.
On an AUA basis, the largest funds with more than $10B of AUA went from the worst performers the previous year to the best in 2023, with a weighted average return of 17.41%.
Investors and allocators reduced positions in hedge funds throughout 2023, with net outflows of $47.2B in total.
From a trading volume perspective, Citco processed more trades than ever before in 2023, breaking the record set the previous year due to a very active Q1 and Q4 which were well ahead in terms of trading activity on a year-on-year (YoY) basis. As well as increases in Equities and Swaps trading, sustained interest in Futures on Rates, Commodities and Currencies also drove activity to a new peak.
Treasury payments set yet another new record in 2023, continuing the trend set in preceding years, although the annual growth rate dipped versus 2022. With interest rates in the US climbing further during the year to reach the highest level for more than two decades, there was an 11% YoY increase in treasury volumes.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Limited, said: “Last year saw new trends emerge from a macroeconomic perspective, with the inflation genie halfway back in the bottle, altering the risk/reward profile for multiple asset classes.
“Volatility also declined versus the previous year, particularly in the second half, while various asset classes enjoyed double-digit returns. As we said at the start of last year, the tougher environment in 2022 did indeed present opportunities, and hedge fund managers took them.
“Looking ahead, with the prospect of rate cuts now on the horizon, and politics set to take centre stage, we expect plenty of twists and turns in 2024 for managers to navigate.”
About the Citco group of companies (Citco)
The Citco group of companies (Citco) is a network of independent companies worldwide. These companies are leading providers of asset-servicing solutions to the global alternative investment industry. With over $1.8 trillion in assets under administration and operations spanning across 36 countries, Citco’s unique culture of innovation and client-driven solutions have provided Citco’s clients with a trusted partner for more than four decades.
