Citco: Majority of hedge funds report gains in 2023| StoneX

^{By Susan Barreto}

Equity strategies led the way in 2023 as roughly 80% of hedge funds overall saw positive returns, according to a year-end review from Citco, the asset servicer with $1.8 trillion in hedge fund assets under administration.

Citco said equity hedge fund strategies had a weighted average return of 21.91% for 2023, followed by fixed income arbitrage at 12.63% and multi-strategy at 12.56%. Overall, the weighted average return for funds was 14.66% was welcome news following the -7.02% return logged in a challenging 2022.

Other strategies seeing gains in 2023 were event-driven funds, which achieved a weighted average return of 7.96%, and global macro funds, although they barely stayed in positive territory at 0.78%.

2022’s winners and losers change places

On the flipside, commodities strategies were the worst performer in 2023. They were the only grouping to have a negative return in 2023, with a weighted average return of -4.17%, although this followed a 20.43% gain in 2022.

Interestingly, the largest funds with more than $10 billion went from being the worst performers the previous year to the best in 2023, with a weighted average return of 17.41%. 

“Last year saw new trends emerge from a macroeconomic perspective, with the inflation genie halfway back in the bottle, altering the risk/reward profile for multiple asset classes,” said Declan Quilligan, head of hedge fund services at Citco Fund Services (Ireland). “Volatility also declined versus the previous year, particularly in the second half, while various asset classes enjoyed double-digit returns. As we said at the start of last year, the tougher environment in 2022 did indeed present opportunities, and hedge fund managers took them.”

Investor inflows

Hedge fund allocations were strong among hybrid hedge funds throughout the course of the year, but investors reduced positions in hedge funds throughout 2023. Citco reported net outflows of $47.2 billion overall.

The stark outflow figure follows a positive December for hedge fund investment activity. Multi-strategy funds were a key driver of elevated capital flows throughout the month, according to recent research from Citco.

In December, allocations more than doubled month-on-month as clients poured $15.7 billion in new money into hedge funds. But this was outweighed by $36.2 billion of investor redemptions during the month, resulting in $20.5 billion of net outflows, Citco said in its previous monthly hedge fund update.

“Looking ahead, with the prospect of rate cuts now on the horizon, and politics set to take center stage, we expect plenty of twists and turns in 2024 for managers to navigate,” Quilligan concluded.

_{This article, “Citco: Majority of hedge funds report gains in 2023 as inflows turn negative” was originally published on February 6th, 2023 on Alternatives Watch and is republished here with permission from BMV Digital, Inc.}