LONDON: Global hedge funds delivered their strongest first-half performance since 2013, data from hedge fund data firm PivotalPath showed, as healthcare, tech and energy trades lifted returns in volatile markets.
In particular, April - when hedge funds returned 3.7% in one month - proved to be the strongest April on record, the PivotalPath data showed.
Stock-trading hedge funds finished June with double-digit returns for the year so far, aided by their ability to successfully navigate already crowded trades, according to a Goldman Sachs client note that was seen by Reuters on Thursday.
Stockpickers returned 4% last month, said the Goldman note from Wednesday. It noted that those hedge funds that use fundamental analysis to assess a company's financial health posted an 18.4% return for the quarter, their strongest performance on Goldman's records. Their year-to-date result was slightly less at 17.4%.
Bigger bets, wagers on healthcare, and joining trades that already had momentum proved successful, said Goldman.
Losses stemmed from how volatile markets turned in June, trading in a surging South Korean market and getting stuck in short bets that asset prices would fall, said the bank.
The second quarter was the best on record for the U.S. SOX chip index, but June was the worst month for the Magnificent Seven.
The Roundhill Magnificent Seven ETF fell 9% in June, its biggest monthly drop in over a year.
Oil prices have returned to pre-Iran war levels and markets expect at least one Federal Reserve rate hike by year-end, even as the latest U.S. jobs number tempered traders' rate hike bets.
Hedge funds that use systematic models assessing market dynamics to pick trades were left with a 1.1% gain in June after losses that came just at month's end. This group gained an 11.3% return for the year to date, according to Goldman.
For systematic traders, losses came from volatile trading in the biggest U.S. companies and Chinese firms, said a separate note from the $18 billion hedge fund Winton, a systematic fund which tracks the performance of its competitors.
Short positioning in fixed income, particularly in long-dated U.S. Treasuries, detracted from performance.
Hedge funds trading a range of different asset classes in global markets, like trend followers and commodity trading advisers, made money in the Canadian dollar and Japanese yen. But bigger losses in the Australian dollar, sterling and Norwegian krone eclipsed winnings, said Winton.
Many systematic strategies have limits on the amount of time they must remain in trades. Faster strategies were able to navigate choppier markets with more ease, said the Winton note. - Reuters
