Preqin’s July hedge fund report highlights that Preqin’s All Hedge Fund Index was up by 1.61 per cent in July 2024, only 17 basis points off the MSCI World Index, at 1.78 per cent – the closest gap between the two indices since July 2019.
Charles McGrath, lead author of the report, notes that the unusually close gap between the two indices was driven largely by the bond market and small-cap equities’ outperformance working in hedge funds’ favour, following the prospect of central bank interest rate cuts globally.
However, in a polarised month for hedge funds’ performance, falling metal prices lowered commodity prices (excluding energy) overall and so impacted recently strong performance, while tech stocks’ price growth flattened in July.
Key report facts:
Hedge funds assets under management (AUM) growth: Q2 2024 marked the seventh consecutive quarter of hedge fund AUM growth globally, reaching an estimated USD4.7tn. However, the USD5.3 billion (+0.11 per cent) increase was below the USD186 billion in AUM added by hedge funds in Q1 2024.
Niche strategies perform best in July: Each underlying niche strategy saw higher returns in July 2024. Collectively, niche strategies were up by 3.36 per cent in the month. Notably, crypto-linked strategies and insurance-linked strategies outperformed the overall hedge fund asset class, the firm says.
Net redemptions from hedge funds remains: Preqin data from July shows that Q2 2024 was the seventh quarter out of the last 12 with net redemptions (net cash outflows) from hedge funds. Overall, hedge funds lost USD9 billion to net redemptions. Equity strategies saw USD5.8 billion in net redemptions in Q2 2024, following USD6.7 billion in Q1 2024. Markedly, niche strategies, although the smallest category, continued to add assets in Q2 2024.
Charles McGrath, AVP, Research Insights at Preqin says: “The wider hedge funds universe is expected to see continued volatility as it moves into September. The Bank of Japan’s July 31 rate hike and its impact on the yen-funded carry trade is likely to be felt in the August hedge funds data. Further, some of the largest managers reduced major technology holdings as second-quarter filings began to be released, which could leave them on the outside should August’s rebound remain on track when the month-end data comes out.”
