Hedge Funds Down In April As Commodities Buck The Trend

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HFA Staff
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Hedge funds experienced their first negative month of the year in April, with nearly all strategy types seeing a dip in performance.

Hedge funds hit their first stumbling block of the year in April, as almost every strategy type saw declines.

According to data from the Citco group of companies, hedge funds posted an overall weighted average return of -0.7% in April, a stark contrast to the 2.2% gain recorded in March. Despite this setback, hedge funds have maintained positive performance for the year, with a weighted average return of 6.5% year-to-date.

Event Driven funds were hit hardest, with a weighted average return of -2.1%. Equities followed with a -1.3% return, and Global Macro strategies recorded a -1% return. Fixed Income Arbitrage and Multi-Strategy funds fared slightly better but still saw negative returns of -0.3%.

In contrast, Commodities strategies bucked the trend, delivering a weighted average return of 2.1% in April, marking their best monthly performance of the year. This category has uniquely posted positive returns every month in 2024.

Analyzing the performance by fund size, most asset categories under administration (AUA) also reported negative returns. The largest funds, those managing over $3 billion in AUA, saw a weighted average return of -1% in April, despite having been the strongest performers earlier in the year.

Smaller funds with less than $200 million in AUA experienced a -0.9% return, while those managing between $200 million and $500 million reported a -0.8% return. Funds within the $1 billion to $3 billion range had a slightly better performance at -0.3%. Interestingly, the only category to post positive returns were funds managing between $500 million and $1 billion, achieving a modest 0.1% gain.

The number of funds achieving positive returns fell sharply, with only 48% in positive territory for April, compared to 77% in March. The disparity between the top and bottom performers widened, as the rate of return spread—the gap between the 90th and 10th percentile fund returns—increased to 7.9% from 6.7% in March.

Capital Flows

In April, hedge funds experienced a notable shift, with capital flows turning positive and marking the highest net inflows seen this year.

Hedge funds reported overall net inflows of $5.7 billion, as subscriptions reached $11.8 billion, surpassing redemptions of $6.2 billion. These figures bring the year-to-date net inflows to $2.6 billion, indicating a positive trend.

Almost all hedge fund strategies saw net inflows in April. Multi-Strategy funds attracted significant interest from investors, with subscriptions totaling $5.2 billion against redemptions of $3.3 billion, resulting in net inflows of $2 billion. Fund of funds followed, with net inflows of $1.1 billion, and Hybrid funds maintained their positive momentum from the first quarter, achieving net inflows of $0.9 billion.

Equity and Global Macro strategies saw net inflows of $0.8 billion and $0.4 billion, respectively. Arbitrage and Emerging Markets strategies recorded net inflows of $0.3 billion and $0.2 billion. The only strategy experiencing net outflows was Event Driven funds, which had a modest outflow of $0.1 billion.

On an Assets under Administration (AUA) basis, all categories returned to net inflows in April. The largest funds, with over $10 billion of AUA, led with net inflows of $2.2 billion, matched by funds with AUA between $5 billion and $10 billion, which also saw net inflows of $2.2 billion.

Funds with AUA between $1 billion and $5 billion reported net inflows of $1.1 billion, while the smallest funds, with less than $1 billion of AUA, had net inflows of $0.2 billion.

Regionally, all areas moved back into positive territory, reversing the trend from March. Funds based in the Americas saw the highest net inflows at $4.2 billion, followed by Europe with $0.9 billion, and Asia with $0.6 billion.

Looking ahead, projections suggest potential outflows later in the quarter, although these projections remain subject to change.

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The post above is drafted by the collaboration of the Hedge Fund Alpha Team.