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May 27, 2024
PI Global Investments
Hedge Funds

In November, Hedge Funds Enjoyed Their Best Month Since January

November was the best month for hedge funds since January, as funds administered by Citco generated a weighted-average return of 3.3%, led by equities funds, which gained 5.1% for the month. Additionally, over 75% of the funds Citco administers were in the green for November.

Meanwhile, the PivotalPath Composite Index gained 2% last month, also a reversal from October’s broadly challenging environment. Nearly all of PivotalPath’s indices were positive for November, with the only two exceptions being managed futures and global macro.

Year to date, the PivotalPath Composite Index is up 5.8%, led by equity diversified and equity sector funds with returns of 8.8% and 8.7%, respectively.

The best month for Citco hedge funds since January

Among Citco-administered funds, equities funds significantly outperformed all other strategies in November, both on a weighted-average and median basis. Equities funds’ weighted-average return of 5.1% was twice as high as the next-best strategy, with multi-strategy funds gaining 2.5% on a weighted-average basis.

Fixed-income arbitrage funds were up 2% for November, while all other strategies generated weighted-average returns of less than 1%. The worst-performing strategy was commodities, the only one that was in the red for November, down 0.4% as the challenging year for resources-focused strategies continued.

For the most part, the strategies’ median returns were nearly in line with their weighted-average returns, reflecting relatively even returns distributions between large and small funds. However, equities funds were up 4.3% while multi-strategy funds gained 1.3% on a median basis, indicating slightly larger dispersions in those strategies. Commodities funds were actually flat on a median basis.

Equities strategies

Although Citco lumps all equities strategies together, PivotalPath breaks them down into three groups: equity diversified, equity sector and equity quant. As mentioned above, two of the three equities strategies led PivotalPath’s November returns, with equity sector returning 4.7% and equity diversified returning 4.1% for the month.

However, event-driven was the third best-performing strategy for November at 3.3%, with equity quant landing in a distant fourth place with a return of 1.2%. Credit and multi-strategy were tied with a monthly return of 1.1%, while volatility trading saw a 1% return for November. The worst-performing strategy last month was managed futures, down 3.4%. Global macro was the only other strategy in the red for November, down 0.7%.

Year to date, equity diversified is the top-performing strategy at 8.8%, followed closely by equity sector at 8.7%. However, credit is the third-best strategy year to date, returning 7%, followed by equity quant at 6.1%.

Managed futures is the only PivotalPath strategy in the red year to date, down 2.3%, although global macro has also been having a tough year, gaining only 1% for the first 11 months.

Returns by size

Based on fund size, all Citco groups generated positive returns for November. Funds with between $200 million and $500 million of assets under administration were the top performers with a weighted-average return of 3.9%. The largest funds with $1 billion to $3 billion came in second with a return of 3.2%. Meanwhile, funds with $500 million to $1 billion and with less than $200 million each generated weighted-average returns of $2.3%.

PivotalPath also reported positive returns for all of its size groups in November as well, led by funds with $100 million to $250 million, which gained 2.76% in November. All other size groups generated returns in excess of 2%, except for the group with $2.5 billion to $5 billion, which gained only 1.43% for November.

However, that size group is leading the way on a year-to-date, gaining 7.27% for the first 11 months. Funds with less than $100 million are up 6.52%, followed by funds with $100 million to $250 million at 6.08% and funds with $500 million to $1 billion at 6.07%.

Outflows picked up in November

Citco reported a marginal uptick in net outflows in November, with investors especially taking profits from their equities funds. Overall, Citco reported $6.6 billion in total subscriptions and $9.4 billion in redemptions, resulting in net outflows of $2.9 billion for November.

Like in October, equities were again the biggest driver of investor flows, capturing only $900 million in subscriptions versus redemptions of $4.8 billion. Citco reported that withdrawals from equities funds have been the norm for much of this year, with more investors exiting than entering those funds.

Most other strategies saw net outflows, with multi-strategy funds seeing the largest outflows of $500 million, followed by hybrid funds with $400 million in net outflows, although they remain hugely popular among investors. Funds of funds and arbitrage strategies each recorded $200 million in net outflows.

Based on size, investors pulled the most money from the largest funds. Those with over $10 billion under administration captured subscriptions of $2.2 billion, versus $5.4 billion in redemptions, resulting in $3.2 billion in net outflows. Funds with $1 billion to $5 billion and with $5 billion to $10 billion each recorded net outflows of $300 million, while the smallest funds with less than $1 billion saw $200 million in net outflows.

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