Macro funds drive August rebound; commodities, CTAs rally

Hedge funds rebounded in August, with the HFRI Fund Weighted Composite Index rising 1.7% for the month and reversing July’s decline. Macro strategies led the advance: the HFRI Macro (Total) Index climbed 4.1% and the HFRI Macro: Commodity Index surged 10%, its largest monthly gain since the series began in January 2008.

Other macro sub-strategies also posted gains. The HFRI Macro: Active Trading Index rose 4.5% and the Systematic Diversified/CTA Index gained 3.45%. The HFR Cryptocurrency Index jumped 19.4%, its strongest monthly return since November 2024.

HFR attributed the moves to higher interest rates, rising tensions in the Middle East and disruptions to shipping and energy flows that pushed energy and materials prices higher, creating trading opportunities for commodity and energy-focused managers.

Equity hedge funds contributed to the rebound. The HFRI Equity Hedge (Total) Index increased 1.5%. Energy and basic materials managers returned 4.1%. Quantitative directional equity strategies rose 2.6%, fundamental growth managers gained 2.4%, and technology strategies added 1.5% after a 5.5% decline in July.

Relative value strategies produced smaller gains. The HFRI Relative Value (Total) Index advanced 0.3%, with multi-strategy managers up 1.0% and fixed income-asset backed strategies returning 0.7%. Event-driven funds were mixed: the HFRI Event-Driven (Total) Index rose 0.15%, with credit arbitrage up 1.6% and merger arbitrage up 1.5%, while special situations fell an estimated 1.6%.

Liquid alternative UCITS funds also recorded gains. The HFRX Market Directional Index climbed 2.1%, the HFRX Global Index rose 0.8%, and the HFRX Macro Index added 1.6%, supported by a 2.4% return from its systematic diversified CTA component. Multi-manager and pod-shop strategies advanced 0.4%.

Performance dispersion narrowed in August. The top decile of HFRI Fund Weighted Composite constituents gained an average 10.3%, while the bottom decile declined 4.9%, a 15.2 percentage-point gap compared with 21 points in July. Over the 12 months through August, the top decile averaged a 65.9% gain and the bottom decile lost 9.9%, a 75.8 percentage-point difference.

About 70% of hedge funds posted positive returns in August. HFR reported that strategies which took advantage of macro volatility outperformed those that mainly aimed to withstand it.

Kenneth J. Heinz, president of HFR, noted, “The increasingly uncertain outlook for traditional equity and fixed-income markets highlights the value of hedge funds that can generate returns with limited correlation to major market shocks.”

HFR added that geopolitical risks, interest-rate uncertainty and commodity-market disruption are likely to continue into the second half of 2026 and that investor allocations to managers with differentiated sources of return could become more important.