Global hedge funds posted positive returns in August even as the unwind in popular yen carry trades whipsawed markets, according to bank research and sources familiar with the funds’ performance on Wednesday.
Hedge funds posted an average 1.3% return for the month, JPMorgan said in a prime brokerage research note on Tuesday.
Some strategies performed better than others because in early August, world stocks sank in response to U.S. recession concerns and a surprise Japanese rate increase wrong-footed currency speculators. Equity markets later rebounded to near-record highs.
Many stock traders at hedge funds had from July begun to reduce their market risk, said Jon Caplis, chief executive of hedge fund research firm PivotalPath, which tracks launches through prime brokers and investor sources.
“During the initial large leg down, many were buying the dip.”
Different hedge fund strategies which use algorithms to trade trends were hurt by the sudden move in the yen, he said.
“While the yen did give back much of the gains, movement in Treasuries also likely went against them given them continued short positions,” said Caplis.
A group of trend funds, or commodity trading advisors (CTAs), tracked by Societe Generale posted a roughly 3% decline in August, the bank’s data showed.
Multi-strategy hedge funds that house many different kinds of trading desks under one roof averaged 0.1% for the same period, the bank added.
Citadel’s flagship multi-strategy fund Wellington was up roughly 1% last month, as well as Schonfeld Strategic Advisors’ flagship fund Strategic Partners.
British hedge fund firm Winton Capital, overseeing $12.3 billion, finished August down roughly 0.2% and 1.8% in its multi-strategy Winton Fund and its Diversified Macro Fund, respectively.
The multi-strategy Winton Fund, which uses quantitative trading, is up 8.1% so far this year, whereas the Diversified Macro fund is up 4%.
Stock trading hedge funds relying on systematic algorithms to trade returned roughly 2% for the month to Aug. 30, JPMorgan said.
The stock trading Eureka Fund of British hedge fund Marshall Wace, co-founded by Paul Marshall, finished down 0.46% for August but was still almost 11% higher since the start of the year, a source with knowledge of the matter told Reuters on condition of anonymity.
The $68.4 billion hedge fund’s Market Neutral Tops fund, meanwhile, returned 1.72% in August, contributing to a 18.53% year-to-date gain.
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