New data from the Citco group of companies’ (Citco), the asset servicer with over $2 trillion in AUA, reports that hedge funds dipped last month with a weighted average return of -0.3% after a strong start to the year, with several strategy types (including Commodity and Equity strategies) experiencing a negative month.
Nonetheless, YTD the weighted average return for hedge funds still stood at 3.7%, and demand from investors was strong, with inflows climbing month-on-month.
All-in-all, 55% of Hedge Funds administered by Citco have achieved positive returns in February 2025.
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Highlights:
- Global Macro funds led the way with a weighted average return of 2.2%. This was followed by Event-Driven funds at 0.2%.
- All other funds were negative, with a Multi-Strategy funds performing worst with a weighted average return of -0.7%.
- Asset under administration categories showed diminished performances across the board. Mid-sized funds performed the best, with those with AUA between $500m-1bn (0.3%) and $1bn-3bn (0.1%) achieving the highest returns. The largest funds, with over $3bn, performed worst, achieving -0.6% weighted average return.
- Rate of return spread rose as the difference between 90th and 10th percentile fund returns fell back to 7.4%, from 8.5% in January.
- It was a strong month for net inflows, reaching $3.1bn overall, as investor demand for the strategies continued.
- Regional capital flow: Funds in the Americas ($2.7B) and Europe ($1.5B) both saw positive net inflows in February; with a net outflow of $1.2B in Asia.
- Treasury payments processed by Citco came in over 50,000 once again, maintaining the strong start to the year, with a 14% year-on-year increase from February 2024 to reach 53,765
Executive Summary
Performance
Hedge fund performance dipped in February after a strong start to the year, with several strategy types – including Commodity and Equity strategies – experiencing negative months.
Following one of the best opening months to a year since the start of the decade, funds administered by the Citco group of companies (Citco) saw a decline in performance in February, with a weighted average return of -0.3%. The number of funds reporting positive returns dropped to 55% in February, down from 77% in January. Nonetheless, year-to-date (YTD) the weighted average return for hedge funds still stood at 3.7%.
Commodities strategies had the lowest weighted average return in February, at -2%, while Multi-Strategy funds fell -0.7%. They were followed by Equity strategies at -0.4%, and Fixed Income Arbitrage strategies at -0.2%.
Amid the declines, some strategy groups were positive; Global Macro funds had another strong month, with a weighted average return of 2.2%, almost identical to January’s return, while Event Driven funds were also positive, at 0.2%.
On an assets under administration (AUA) basis, returns were mixed in February. The largest funds with more than $3bn of AUA had the lowest weighted average return, at -0.6%, while the sub $200m and $200m-$500m of AUA categories were also negative, both coming in at -0.4%.
In comparison, funds with between $500m-$1bn of AUA had the highest weighted average return, at 0.3%, while funds with between $1bn-$3bn of AUA were up 0.1%.
The rate of return spread - the difference between the 90th and 10th percentile fund returns – also fell back in February to 7.4%, down from 8.5% the previous month.
Capital Flows
Hedge funds saw net inflows increase month-on-month in February as investor demand for the strategies continued.
Net inflows came in at $3.1bn overall, taking YTD net inflows to $6.1bn1, as Multi-Strategy funds in particular continued to be favoured by investors.
Multi-Strategy funds took a further $3.2bn of net inflows in February, adding to January’s positive start to make it $4.2bn of net inflows YTD. Hybrid funds also saw $1bn of net inflows, to take their YTD net inflows to $1.9bn.
Most other strategy types saw smaller moves, with marginal net inflows or outflows in February, bar Equity strategies. Equity strategies had $1.3bn of net outflows in February, to make it $1.1bn of net outflows YTD.
On an Assets under Administration (AUA) basis, all categories saw net inflows in February. Funds with between $5bn-$10bn of AUA had the highest net inflows, at $1.7bn, followed by $10bn+ funds at $0.7bn, and then funds with between $1bn-$5bn of AUA, at $0.6bn. The smallest funds with less than $1bn of AUA had net inflows of $0.2bn, reversing some of the outflows seen in January. So far this year, it is the funds at the larger end of the scale with the highest net inflows, with the overall tally for funds with between $5bn-$10bn of AUA standing at $3.7bn, followed by the $10bn+ category at $2.1bn.
On a regional basis, funds in the Americas were the focal point in February, with the highest subscriptions ($5.9bn) and redemptions ($3.2bn), to leave them with net inflows of $2.7bn. Meanwhile, funds in Europe had net inflows of $1.5bn, while funds in Asia had net outflows of $1.2bn.
Funds Of Hedge Funds Deliver Double Digit Returns For Investors
Funds of hedge funds saw performance soar in 2024, outperforming returns achieved the previous year, the Citco Fund Services Companies (CFS) 2024 Fund of Hedge Fund Update can reveal.
Funds of hedge funds serviced by CFS achieved an average return of 10.1%, well ahead of the 5.9% seen in 2023, to make it two consecutive years of positive returns. Both halves of the year were positive in 2024, with the 5.1% average return achieved in the first six months of the year all but repeated in the second half.
In total, 94% of funds had positive performance in 2024, ahead of the previous year’s tally of 88% of funds.
To read the full report please click here.
Performance
Overview of Investor Flows
Insights into Trade Volumes
The number of trades processed by Citco reached a record high in February amid a surge in volatility in the second half of the month caused by ongoing geopolitical issues and negotiations around tariffs.
Citco saw an average increase in volumes of 20% across strategies and client mixes, with high-frequency strategies and large platforms experiencing the highest increases, at 21%. The jump in volatility has carried on in early March and is expected to result in new highs this month.
The most significant increases in trade volumes were observed in IR Futures, Index Options, Convertible Bonds, and CDS trades across all strategies. The overall trade ingestion Straight-Through Processing (STP) rate was 97.5%, with a higher STP rate of 98.44% among high-frequency trading strategies.
Insights into Payments, Treasury and Collateral
Treasury payments processed by Citco came in above 50,000 once again in February, continuing the momentum seen throughout the last year.
Payments came in at 50,529 for the month, an increase of 14% year-on-year versus the previous February. While payments were lower than January’s total of 53,765, the year is off to its strongest start on record, with over 100,000 payments already processed.
Demand for outsourced treasury has climbed every year since Citco started reporting on it back in 2019, and as the technology and service proposition is continually enhanced, we expect this trend to continue throughout the decade.
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 $2 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.
