Hedge funds delivered a mixed first-half performance, with macro funds Caxton Associates and Brevan Howard struggling to maintain gains while a couple of multi-strategy and systematic funds went gangbusters, according to sources and public data.
Andrew Law’s Caxton Associates, which places bets on macro economics, finished last month flat after a yearly performance to May-end that was up 4%, two sources familiar with the matter said.
Hedge fund Brevan Howard’s Master Fund rose 0.90% in June, but still ended the first half of 2024 down 1.56% for the year, a source with knowledge of the data said.
The source did not give a reason for the performance from the $35 billion hedge fund.
Not all macro strategies struggled. Bridgewater Associates’ flagship fund was up 14.4% this year through June 26, according to a source.
The HFR Global Hedge Fund index capped the first half with a meager 2.89% gain. A first sample of hedge fund numbers obtained by Reuters shows there was some performance diversion in the industry during a period in which a tech boom-led global markets to a strong performance.
“There was such a dispersion between returns that the benchmarks don’t always tell you exactly how a certain strategy is doing,” said Lilly Knight, K2 Advisors head of investment management.
The S&P 500 index and technology-laden Nasdaq rose on Wednesday to post record high closes, as data pointing to a softening economy raised hopes the Federal Reserve could cut interest rates in September.
The Dow Jones Industrial Average closed slightly lower, pressured by selling in healthcare and consumer stocks during a shortened trading session ahead of the Fourth of July. The market will stay closed on Thursday for U.S. Independence Day, keeping trading volumes thin throughout the week.
Both the ADP Employment report and weekly jobless claims data pointed to easing labor market conditions ahead of Friday’s closely watched non-farm payrolls report. Markets hope signs of weakness in the labor market will encourage the Fed to cut interest rates.
“It’s quite a strong unemployment claims number, and it’s fitting in with an overall trend that’s probably an indication of loosening up in the jobs market. It must be quite welcoming for the Fed,” said David Morrison, Trade Nation senior market analyst.
Also, PMI data from the Institute for Supply Management was weaker than expected, and factory orders unexpectedly slumped. Investors boosted bets of a September rate cut to over 70%, as per LSEG’s FedWatch.
The Fed’s June meeting minutes are due after the market closes.
Tesla jumped 6.5%, trading near a six-month high after rising more than 10% on Tuesday following a smaller-than-expected drop in second-quarter vehicle deliveries.
The Philadelphia SE Semiconductor Index rose 1.92%, helped by gains in the U.S. listing of Taiwan Semiconductor Manufacturing and Broadcom.
Nvidia closed 4.6% higher, after slipping on Tuesday, while some other mega-stocks were weaker such as Amazon, closing 1.2% lower.
“The tendency at the moment is towards rotation ... we have quite a few days where we see the Russell down, and tech up and vice versa,” Morrison said, though noting that the market’s optimism around megacap tech stocks was still strong.
Some multi-strategy hedge funds were able to post double-digit returns in the first half of the year.
Cinctive Capital was up 11%, as its bets around the impact of artificial intelligence on energy, utilities and technology paid off.
Schonfeld Strategic Advisors’ flagship fund rose 10.3%, while the AQR Apex Strategy gained 13.5%. All of them beat giants Citadel and Millennium Management.
Global fundamental long/short equities hedge funds posted gains of 7.55% in the first half, according to a Goldman Sachs prime brokerage note.
Below the surface, the top performers posted almost 15% in gains, while the underperformers fell 2.22%.
On average, hedge funds struggled to keep pace with the MSCI’s 47-country world stock index, which rose roughly 11% in the first half.
The S&P 500 soared 15% in the same period, mainly due to a handful of megacap stocks such as Nvidia.
“There are hedge funds that own the megacap names that rallied in the first half of the year, but they’re not owned at anything close to market cap weight,” said Craig Bergstrom, chief investment officer of Corbin Capital.
Philippe Laffont’s Coatue Management rose 9.2% in the first half, a source said.
Aspect Capital’s Diversified fund, which trades systematically, returned 14.27% for the year to end June, said a source. The hedge fund, which currently oversees $9.1 billion of assets, made gains in agricultural markets, currencies and stocks.
Kairos Partners’ senior portfolio manager, Mario Unali, said that going forward, hedge funds will face more challenges after a strong rally. “Markets are richer than a year ago and uncertainty is now higher,” he said.
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