- Equity and Multi-Strategy funds lead the way in Q1.
- All investment strategy and fund size categories positive.
- Citco sees record-trading volumes and treasury payment volumes.
Equity and Multi-Strategy funds helped hedge funds start 2024 on the front foot, recording their best quarter post the global pandemic.
Funds administered by the Citco group of companies (Citco), the leading asset-servicer with over $1.9 trillion in assets under administration (AuA), delivered a weighted average return of 7.3% overall in Q1, building on the strong performance seen throughout much of 2023.
Equity funds were the top performers, with a weighted average return of 8.49%, followed by Multi-Strategy funds at 7.59%, and Event Driven funds which came in at 4.03%. All other strategy types were also positive, with Fixed Income Arbitrage, Commodities and Global Macro funds at 3.49%, 2.75% and 2.58% respectively.
AuA categories were also all in positive territory in Q1. The largest funds with more than $3B of AuA achieved a weighted average return of 8.26%. Returns went in descending order in line with fund sizes in Q1, with funds with AUA between $1B-$3B the second-best performers at 6.69%, followed by the $500M-$1B of AUA category which came in at 5.15%. Funds with between $200M-$500M of AUA and those with below $200M stood at 4.72% and 3.54% respectively.
Capital flows were negative in Q1, with net outflows of $4.4B for the quarter. Equities once again saw the most net outflows after seeing redemptions outweigh subscriptions each calendar month throughout Q1. In total, Equity strategies had net outflows of $4.1B, followed by Multi-Strategy funds at $1.8B, and Emerging Markets at $0.6B. However, several strategies saw net inflows in Q1, led by Hybrid funds which had net inflows of $1.1B. Arbitrage funds also saw net inflows of $0.9B, followed by Fund of Funds at $0.4B, and Global Macro funds which were just positive at $0.1B.
The quarter saw record trading volumes, eclipsing the high we witnessed in the final quarter of 2023. While activity has been largely driven by high-frequency trading strategies resulting in significant trading volume in equities and equity swaps, there was also sustained interest in fixed income products and derivatives on commodities, rates, and indices.
Treasury payment volumes set a new quarterly record high in Q1 amid positive signs for the US economy. The total number of treasury payments came in at 141,806, just ahead of Q4’s previous record of 140,665, and some 17% ahead of Q1 2023.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Limited, said:
“Rallying stocks and record prices of some core commodities have helped get 2024 off to a flying start in terms of hedge fund performance.
“Hedge funds administered by Citco have now seen six consecutive quarters of positive returns, and while strategies go in and out of favour, as we start 2024 there is a real breadth to those returns, with all strategy types in the green for Q1.
“A new narrative has emerged so far this year whereby stronger economic growth – and not the prospect of rate cuts – has taken centre stage. While investors will not be complacent, there remain multiple opportunities out there for hedge fund managers, even after the gains we have seen year-to-date.”
Citco group of companies (Citco): An Asset-servicing solution provider
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 $1.9 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. Having grown organically into one of the largest asset servicers in the industry, Citco’s Fund Services companies offer a full suite of middle office and back office services including, treasury and loan handling, daily NAV calculations and investor services, corporate and legal services, regulatory and risk reporting as well as tax and financial reporting services. Investing heavily in innovation and technology whilst further developing its current suite of client-friendly solutions, Citco will continue into the future as a flagbearer for the asset-servicing industry.
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