Hedge funds clocked by niche researcher and multi-manager, Aurum, closed in on US$3 trillion during the first half of 2024 despite significant net outflows from the alternative investment universe.
According to the Aurum study, hedge fund assets under management rose US$103 billion over the six-month period to nudge the US$3 trillion mark as almost US$150 billion of investment returns counteracted US$46 billion in net outflows.
The half-yearly hedge fund survey says all eight overarching strategies – including quant, macro, arbitrage, long-short and long-biased – reported asset growth during the period, largely on the back of performance.
Just two of the eight categories – multi-strategy and credit – saw substantial net positive inflows over the six months to June 30.
“The hedge fund industry was up 6.1% for the first half of 2024 (on an asset weighted basis),” the Aurum report says. “This compares to the mean figure of 5.9%, suggesting that, on average, larger hedge funds have outperformed.”
Most of the hedge fund performance was front-loaded into the first quarter of the year where returns hit 4.8 per cent followed by just 1.2 per cent in the subsequent three months.
The best-performing hedge fund strategies during the first six months of the year tended to be more closely correlated with equities or were “able to capitalise on elevated levels of volatility in the market”, the Aurum report says.
Meanwhile, arbitrage funds turned in the lowest results in the Aurum hedge database for the half-year, eking out an average 2.1 per cent with poor returns from two sub-categories in the genre – volatility (0.8 per cent) and tail risk (-1.6 per cent) – hurting the average.
Tail risk arbitrage was the only hedge fund strategy to report negative returns for the period.
“It is no surprise that tail-hedging strategies would once again underperform in 2024 given the negative beta associated with the strategy and declining realised and implied volatility levels when compared with 2020, which was an outstanding year for the strategy,” the report says.
Over the five years to the end of June, hedge funds (or those surveyed by Aurum, at least) have seen annualised returns of 6.4 per cent – well ahead of bonds (-2 per cent) but lagging equities (8.3 per cent).
However, the diverse hedge fund collective outperformed shares “from a risk-adjusted perspective”, the report says, with respective ‘Sharpe ratios’ of 0.7 and 0.4.
The Bermuda-licensed Aurum provides performance and market-based analysis based on data from almost 3,400 hedge funds as well as managing fund-of-funds portfolios in the sector.