New data from the Citco group of companies (Citco), the leading asset-servicer with $2 trillion in assets under administration (AUA), shows the year in hedge funds is shaping up to finish nicely, with a year-to-date performance of 11.03% as of September 30th.
The Q3 2024 report reveals a positive summer performance across all but one of the fund strategies, totalling an overall weighted average return of 3.22%, an increase from 1.09% in Q2 2024.
Highlights:
- The Global Macro strategy led the way with a 5.25% weighted average return, showcasing strong performance. Fixed Income Arbitrage funds followed with a 4.09% return.
- Asset under administration categories were all positive in Q3 2024. Funds with $1-$3 billion AUA achieved the highest weighted average return of 5.34%, closely followed by funds with $500M-$1B with a weighted return of 3.51% and funds with $200M-$500M at 3.08% indicating solid performance among mid-sized funds.
- Multi-Strategy funds experienced significant net inflows of $3.7B, the best performing fund strategy in Q3, closely followed by hybrid funds which saw net inflows of $3.6B
- Treasury payment volumes continued at record setting pace, with 151,662 coming in, with a particularly strong performance in July. This marks the sixth consecutive quarter of increasing volumes.
- Hedge funds saw net inflows of $1.1 billion, as positive inflows in July ($4.2B) and August ($3.1B) outweighed September’s outflows.
- Funds in Europe ($2.8B) and the Americas ($0.1B) both saw positive net inflows in Q3.
Executive Summary
Hedge funds recorded their eighth successive quarter of positive returns in Q3 2024, with funds achieving an overall weighted average return of 3.22%, taking them into double figures year-to-date (YTD).
The overall weighted average return YTD for funds administered by the Citco group of companies (Citco) was 11.03% as at end of September, with 83% of funds in positive territory for the year.
Global Macro strategies achieved the highest weighted average return in Q3, at 5.25%, to give them a YTD weighted average return of 12.11%. Equity strategies also enjoyed another quarter of gains, at 3.79%, resulting in a weighted average return YTD of 15.14%, making them the top performer for the year so far. Fixed Income Arbitrage funds came in 4.09% in Q3, taking them to 5.48% YTD. Overall, all strategy groups are positive so far this year.
Hedge funds saw net inflows of $1.1B overall in Q3, building on the $4.7B seen in Q2, as net inflows of $4.2B in July and $3.1B in August outweighed September’s net outflows.
Two strategies took centre stage in term of inflows in Q3. Multi-Strategy funds had net inflows of $3.7B, just ahead of hybrid funds at $3.6B, both continuing to attract investor flows for another quarter.
Meanwhile, Global Macro and Equity strategies accounted for the majority of the outflows, while flows across Arbitrage, Emerging Markets, Event Driven and Fund of Funds strategies were more muted.
The record-breaking run of increasing treasury payment volumes continued in Q3 with a new quarterly record set. Treasury payment volumes came in at 151,662 in Q3, above the 150,000 mark for the first time since Citco started reporting the data. The increase of 3% quarter-on-quarter was driven by the second highest monthly volume on record in July, which itself was followed by two 49,000+ months in August and September.
Meanwhile, trade volume trends were marked by periodic surges in activity in the third quarter, driven by volatility and anticipation of interest rate moves. High-frequency strategies continued to play a significant role, and despite some volatility, trade volumes remained robust.
Declan Quilligan
Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd
Overview of data
Performance Data
We have considered funds for which we deliver daily PNL/NAV reporting. We only include returns for those strategies where we believe we have sufficient daily service delivery on that strategy.
Treasury
Data on payments volumes are constituted by all dispatched payments including Letter of Acceptances (LOAs). Excludes all payments to investors/ limited partners.
Performance
Three quarters of funds achieved positive returns in the third quarter, with Global Macro, Fixed Income Arbitrage and Equity-focused funds seeing the best performance.
Funds achieved an overall weighted average return of 3.22% in Q3, significantly ahead of the second quarter, taking the overall weighted average return YTD to 11.03%.
Global Macro funds achieved the highest weighted average return in Q3, at 5.25%, to give them a YTD weighted average return of 12.11%. Equity strategies also enjoyed another quarter of gains, at 3.79%, resulting in a weighted average return YTD of 15.14%, making them the top performer for the year so far. Fixed Income Arbitrage funds came in 4.09% in Q3, taking them to 5.48% YTD.
Most other strategy groups also saw positive returns in Q3, with Multi-Strategy funds at 2.63%, and Event Driven at 1.86%, and only Commodities strategies were the outliers, with a weighted average return of -2.16%. Overall, all three strategy groups remain positive YTD, with Multi-Strategy at 8.56%, Event Driven at 6.18%, and Commodities at 1.44%.
The median return for the quarter came in at 9.38%, below the weighted average return and therefore suggesting larger funds outperformed smaller ones.
Spreads, the difference between the 90th and 10th percentile fund returns, also blew out significantly quarter on quarter, from 11.17% in Q2 to 15.09% in Q3.
All assets under administration (AUA) categories were positive in Q3, with the standout performer funds with between $1B-$3B of AUA.
These funds achieved a weighted average return of 5.34% in Q3, followed by the $500M-$1B category at 3.51%, and then funds with between $200M-$500M of AUA at 3.08%. The largest funds with more than $3B of AUA were next, at 2.65% YTD, while the smallest funds with less than $200M of AUA came in at 2.55%.
Thanks to their Q3 performance, funds with between $1B-$3B of AUA now have the best YTD weighted average returns of all categories, at 13.85%. Next are funds with more than $3B of AUA, at 10.94%, and funds with between $500M-$1B of AUA at 10.13%. The smaller funds with between $200M-$500M of AUA, and those with less than $200M, had weighted average returns of 8.49% and 5.75% respectively.
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.
