Weekly Update

Hedge funds held gains in August market rollercoaster

JPMorgan's prime brokerage research note, released Tuesday, indicated that hedge funds achieved an average return of 1.3% for the month according to Reuters report. However, performance varied across strategies, as early August saw global stock markets drop in response to U.S. recession fears and an unexpected rate hike from Japan that disrupted currency trading. Later in the month, equity markets bounced back, approaching record highs.

Jon Caplis, CEO of hedge fund research firm PivotalPath, noted that many stock-focused hedge funds began reducing risk in July. "During the initial sharp downturn, many traders were buying the dip," he said. However, hedge funds employing algorithmic trading strategies were impacted by the sudden movements in the yen.

Although the yen retraced much of its gains, Treasuries' movement likely posed further challenges to funds holding short positions, according to Caplis. A group of trend-following funds, or commodity trading advisors (CTAs) tracked by Societe Generale, reported an approximate 3% loss in August, according to the bank's data.

Multi-strategy hedge funds, which operate various trading desks, posted an average gain of 0.1% during the same period. Citadel’s flagship multi-strategy fund, Wellington, and Schonfeld Strategic Advisors' Strategic Partners fund both gained around 1% in August. On the other hand, British hedge fund firm Winton Capital saw its multi-strategy Winton Fund decline by 0.2% and its Diversified Macro Fund drop by 1.8%. Despite these declines, the Winton Fund is up 8.1% year-to-date, while the Diversified Macro Fund has gained 4%.

Regal Partners eyes $1bn for new Cayman Islands fund

Regal Partners Ltd, the Australian hedge fund firm formed by the 2022 merger of Regal Funds Management and VGI Partners, is aiming to raise around $1 billion for its latest Cayman Islands-based fund, as part of its broader expansion strategy, according to a Bloomberg report. The new Regal Partners Private Fund will act as a feeder into the firm's Australian multi-strategy fund, which has achieved a 19% return since its launch in December. This multi-strategy fund includes investments in private credit, water, power, resources, and Regal's flagship global long-short equity fund, which has outperformed most competitors with a 25% return over the past year, Bloomberg data shows.

Chief Investment Officer Philip King stated that the Cayman Islands-based fund is targeting institutional investors and family offices, allowing them to invest in Regal's multi-strategy offering in a tax-efficient manner. Regal Partners, which now manages nearly AUD 17 billion ($11.5 billion) in assets, a significant increase from AUD 4.7 billion just two years ago, has offices in Sydney, Singapore, and New York. The firm has transitioned from primarily focusing on long-short equities to becoming a diversified investment manager in private markets and alternative assets.

Walleye leads August multi-strat gains

Walleye Capital’s $4.8 billion multi-strategy hedge fund delivered strong results in August, surpassing some of the industry’s top players, including Citadel, Millennium, and ExodusPoint, according to a report by Business Insider.

The report states that it posted a 3.4% gain last month, bringing its year-to-date performance to 11.3%. The fund’s volatility strategies, rooted in Walleye’s background as a proprietary options market making firm, were crucial in navigating the early August market turbulence. The S&P 500 finished the month with a 2.3% gain, but the market experienced significant volatility, initially dropping over 7% due to instability in Japanese markets and concerns over U.S. economic data before recovering to near record highs.

Despite its relatively smaller size compared to industry giants, Walleye’s fund outperformed many of its multi-strategy competitors in August. The fund, which is currently closed to new investors, is projected to reach $5 billion in assets by the fourth quarter, the source added.

In comparison, Citadel’s flagship Wellington fund, led by Ken Griffin, gained 1% in August, with year-to-date returns of 9.9%. Izzy Englander’s Millennium saw a 0.7% increase for the month, bringing its 2024 returns to 8.1%, while ExodusPoint recorded a 0.9% gain, pushing its annual return to 4.6%.

Digital assets fund see $300m outflows amid stronger macro data

Digital asset investment products experienced outflows totalling $305 million last week, reflecting broad negative sentiment across providers and regions, according to Hedgeweek. The outflows were primarily concentrated in bitcoin, which saw $319 million withdrawn. In contrast, short bitcoin products saw a second consecutive week of inflows, amounting to $4.4 million.

Ether also faced $5.7 million in outflows, while its trading activity remained sluggish, reaching just 15% of the volume observed during the U.S. ETF launch week.