Hedge funds sustained strong December performance with 2% weighted average return, according to data from the Citco group of companies (Citco).
In December, hedge funds exhibited positive performance across all strategies, with event driven funds leading the way with the highest weighted average return at 3.5%. Equities and fixed income arbitrage followed closely with returns of 3.3% and 2.4%, respectively.
On an assets under administration basis, all categories reported positive returns, with funds between $1 billion and $3 billion emerging as the top performers, achieving a weighted average return of 2.7%.
The end of the year marked a robust performance for hedge funds, as 79.2% of funds recorded positive returns, surpassing November’s figure of 76.8%. Despite this overall positive trend, Multi-strategy funds experienced net outflows of $9.4 billion, while hybrid strategies defied the trend by attracting net inflows of $1.9 billion.
Funds administered by the Citco group of companies posted an overall weighted average return of 2% in December, with event-driven, equities and fixed income arbitrage funds leading the pack. Global macro strategies followed with a weighted average return of 1.9% and multi-strategy and commodities funds rounded off the month with returns of 0.9% and 0.6%, respectively.
In terms of fund size, the positive momentum continued for all strategies for the second consecutive month. Funds with AUA between $1 billion and $3 billion outperformed, with a weighted average return of 2.7%, while smaller funds with AUA between $200 million-$500 million and less than $200 million recorded returns of 2.4% and 2.2%, respectively. Notably, the largest funds, with over $3 billion of AUA, had the lowest weighted average return in December at 1.7%, deviating from the pattern observed throughout much of the year.
Alternatives funds could be missing out on a performance boost from cash positions if they are not making the most of multi-year high interest rates, said Ryan Fitzgerald, head of middle office solutions, Citco Fund Services (USA) Inc.
Cash management has gained heightened importance for fund managers, spanning from emerging funds to multi-billion dollar strategies, particularly since the beginning of last year. This shift is driven by central banks, such as the US Federal Reserve, raising rates to counteract rising inflation, added Fitzgerald.
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