Hedge Funds Maintained Gains Amid August Market Rollercoaster, According to Reuters

Global Hedge Funds See Positive Returns in August Despite Market Volatility

By Nell Mackenzie and Carolina Mandl

LONDON – According to bank research and insider sources, global hedge funds recorded positive returns in August, even amid the turbulence caused by the unwinding of popular yen carry trades.

JPMorgan reported that hedge funds achieved an average return of 1.3% for the month. Various strategies experienced differing levels of success, particularly as early August saw a drop in global stock prices due to concerns about a potential U.S. recession and an unexpected interest rate hike in Japan, which confused currency speculators. However, equity markets made a recovery later in the month, approaching record highs.

Jon Caplis, CEO of hedge fund research firm PivotalPath, noted that many stock traders began to lower their market risk in July. "During the initial significant decline, many were buying the dip," he explained.

However, strategies that depend on algorithms to trade trends were negatively impacted by the sudden yen fluctuations. Caplis added that while the yen gave back much of its gains, the movement in U.S. Treasuries likely worked against these funds due to their continued short positions.

Trend funds, also known as commodity trading advisors (CTAs), tracked by Societe Generale, saw an approximate decline of 3% in August. Multi-strategy hedge funds, which encompass various trading desks, averaged a return of just 0.1% for the same timeframe.

Citadel’s flagship multi-strategy fund reported a gain of around 1% for August, as did Schonfeld Strategic Advisors’ main fund, Strategic Partners. Conversely, British hedge fund firm Winton Capital, managing $12.3 billion, concluded August down about 0.2% in its multi-strategy Winton Fund and 1.8% in its Diversified Macro Fund. The Winton Fund, employing quantitative trading, has seen an 8.1% increase so far this year, while the Diversified Macro Fund has risen by 4%.

Hedge funds focused on systematic stock trading recorded returns of roughly 2% for the month, as noted by JPMorgan. Marshall Wace’s Eureka Fund ended August with a decline of 0.46%, yet it remained nearly 11% up for the year. Meanwhile, the hedge fund’s Market Neutral Tops fund achieved a return of 1.72% in August, contributing to a substantial year-to-date gain of 18.53%.

Hedge Fund Performance Highlights:

• Citadel: 1% return for August; 9.9% year-to-date
• Schonfeld Strategic Partners: 1% return for August; 11.8% year-to-date
• Marshall Wace Eureka Fund: -0.46% return for August; 10.97% year-to-date
• Winton Fund: -0.2% return for August; 8.1% year-to-date

Despite the volatility in the markets, hedge funds showcased resilience and adaptability through varying strategies and performances in August.