Hedge Funds Have Best Month in More Than Two Years

Hedge funds had their best month since February 2021 according to the HFRI 500 Fund Weighted Composite Index, which surged an estimated +2.35% in June, as managers positioned for growth in technology, relative value arbitrage and quantitative exposures.

The HFRI Fund Weighted Composite Index (FWC) also rose strongly in June, gaining 2.2%, similarly driven by equity hedge and event driven strategies. It was also another good month for the strategy that has been the stand out in recent months, Macro, which, led by multi-strategy and quantitative, trend-following CTA strategies, saw the investible HFRI 500 Macro Index gain 2.0% for the month. The HFRI Macro (Total) Index added 1.5% and the HFRI 500 Macro: Multi-Strategy Index jumped 2.9%, and the HFRI 500 Macro: Systematic Diversified Index advanced 2.4%.

Fixed income-based, interest rate-sensitive strategies also advanced in June, as the Federal Reserve paused rate increases but left open the possibility of additional hikes in coming months, and as banking volatility subsided. The HFRI 500 Relative Value Index gained an estimated 1.2% for the month, while the HFRI Relative Value (Total) Index advanced an estimated +0.9%.

Performance dispersion ticked lower in June, as the top decile of the HFRI FWC constituents returned an average of +9.85%, while the bottom decile fell by an average of only -3.5%, representing a top/bottom dispersion of 13.35% for the month, down from 14.0% in May. In June, approximately two-thirds of hedge funds posted positive performance.

“Hedge funds surged in June, led by growth equity exposures and, specifically, artificial intelligence,” says Kenneth Heinz, president of HFR, the provider of the indices. “While gains were driven by these dynamic exposures, industry performance was strong across-the-board, including leadership from activist and quantitative funds, as all four main strategies advanced for the month.

“While the transformative impact of AI has begun and accelerated in recent months, it has the potential to impact a wide range of industries with exponential growth while transforming competitive landscapes, albeit with expected high volatility and potential for extreme dislocations as these evolutionary transformations develop,” he continues. “Institutional investors seeking access to these specialised, powerful trends are likely to allocate and expand commitments to managers which have demonstrated their capacity and capabilities through the early stages of this transformative market dynamic.”