Global macro and equities drive May hedge fund gains

Citco reported hedge funds generated a weighted average return of 3.6% in May, lifting year-to-date returns to 7.9% and marking the fifth consecutive month of net investor allocations.

Global macro managers led performance with a weighted average return of 5.3% for the month, followed by equity strategies at 4.8% and event-driven funds at 4.7%. Multi-strategy funds returned 2.7%, fixed income arbitrage gained 0.8% and commodities strategies fell 2.6%. Citco’s report noted that the May results continued a rebound from the market sell-off in the first quarter.

Larger managers outperformed smaller peers in May. Funds with more than $3bn in assets under administration posted an average return of 4.7%, compared with 2.5% for managers with $1bn to $3bn. Returns declined across smaller size bands, with funds below $200m delivering an average gain of 0.6%. Around 69.3% of funds reported positive returns in May, down from 90% in April, while the gap between the strongest and weakest performers narrowed from 11.2 percentage points to 7.7 percentage points.

Investor demand remained strong. Gross subscriptions totaled $22.5bn in May, producing $9.2bn of net inflows for the month. Industry-wide net inflows have reached $53.8bn so far this year.

Multi-strategy vehicles accounted for the largest share of fundraising, attracting $6.3bn in May and $32.2bn year to date. Equity funds took in $2.1bn, while fund-of-funds and hybrid strategies each attracted about $900m. Despite solid performance, global macro funds recorded $900m of net outflows in May.

The biggest managers captured most new capital. Firms overseeing more than $10bn in assets reported $7.7bn of net inflows in May, taking their year-to-date total to $42.1bn. Managers with $5bn to $10bn also saw positive allocations, while smaller managers recorded more modest inflows.

Regionally, Europe led fundraising with $4.9bn of net inflows in May, followed by the Americas with $3.2bn and Asia-focused funds with $1.1bn. European managers have taken nearly 60% of the sector’s net inflows through the first five months of the year.

The figures are drawn from Citco’s monthly hedge fund analysis.