Defined Benefit
Insurance Assets
Nonprofit

Hedge Funds Gain, Capitalizing on Volatility

Hedge Funds Gain, Capitalizing on Volatility
clock
2 min 7 sec

U.S. equity markets moved higher during 2Q24, driven by a few large technology and AI-related companies along with generally healthy corporate earnings. Interest rates were volatile as signs of sticky inflation drove bond yields sharply higher. However, as the quarter wore on, softer macroeconomic data points and lower inflation readings reversed much of the move. The 10-year U.S. Treasury rose from 4.21% to 4.36%, and the 30-year from 4.34% to 4.51%, as Fed minutes indicated an eagerness to cut rates in September.

2Q24 hedge funds performance

Hedge funds ended 2Q higher, as strategies with a higher correlation and a material beta to equities were successfully able to capitalize on volatility in markets. Equity hedge funds again saw positive performance; managers that focused on technology saw the biggest gains. Managers with more directional equity exposure and those with more of a market-neutral focus also had a solid quarter. Relative value strategies also gained; credit relative value and merger arbitrage strategies added to that performance. Macro strategies ended the quarter lower, as long positioning in developed market front-end rates detracted from performance, along with shorts in U.S. equities and long Japanese yen exposure.

hedge funds

Serving as a proxy for large, broadly diversified hedge funds with low-beta exposure to equity markets, the median Callan Institutional Hedge Fund Peer Group rose 1.7%. Within this style group of 50 peers, the median hedged credit manager gained 1.7%, the median hedged equity manager added 2.4%, and the median Callan Institutional hedged rates manager rose 1.2%.

Within the HFRI Indices, the best-performing strategy was relative value, which was up 1.4%. Equity hedge gained 1.0%, while macro strategies ended the quarter slightly negative, as rates trading and long U.S. equities drove performance lower.

hedge funds

The median Callan Long-Short Equity FOF ended 0.5% higher, as managers with a focus on the Technology sector drove performance. The median Callan Core Diversified FOF rose 1.6%, driven by equity and event-driven strategies. The Callan Absolute Return FOF ended up 1.8%; equity beta strategies were behind this move.

The median Callan MAC Long Biased manager rose 1.9%, as the strong equity rally pushed performance higher. The median Callan MAC Risk Parity peer group rose 0.7%, as equities and fixed income drove the gains.

hedge funds

As inflationary concerns continue to subside, market expectations for the Federal Reserve to begin cutting interest rates grow. Recessionary concerns from a year ago have dwindled as the economic expansion continues, though there remain several concerns from market procrastinators. The potential for alpha generation through long-short strategies remains strong, supported by significant dispersion among sectors and diverse macro trading opportunities.

Disclosures

The Callan Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to any affiliate firms, or post on internal websites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients only have the right to utilize such material internally in their business.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Private Markets

Strong Start to the Year for Most Hedge Fund Strategies

Joe McGuane
Callan expert analyzes the performance of hedge funds and multi-asset class strategies in 1Q24.
Private Markets

A Strong Finish to 2023 Bodes Well for Hedge Funds in 2024

Joe McGuane
Callan expert analyzes hedge fund outlook for 2024.
Private Markets

Hedge Funds Gain in 4Q23 Spurred by Rising Stocks and Bonds

Joe McGuane
An update on 4Q23 hedge fund performance
Private Markets

ILS on Pace for Banner Year in 2023

Sean Lee
Sean Lee discusses the returns for insurance-linked securities (ILS) for the year-to-date.
Private Markets

Most Hedge Fund Strategies End Quarter Slightly Higher

Joe McGuane
Joe McGuane analyzes hedge fund performance in 3Q23.
Operations

What Investors Need to Know About the SEC’s 2023 Private Funds Rules

Alternatives Consulting Group
The Alternatives Consulting Group analyzes the new SEC rules on unregistered private funds.
Private Markets

Hedge Funds Gain but Lag Equity Indices

Joe McGuane
Joe McGuane analyzes hedge fund performance in 2Q23.
Private Markets

Steady Gains for Hedge Funds Amid Volatile Markets

Joe McGuane
Joe McGuane assesses hedge fund and multi-asset class (MAC) performance in 1Q23.
Private Markets

Year Ends on a High Note for Hedge Fund Managers After Tough Start

Joe McGuane
Joe McGuane analyzes hedge fund and MAC performance in 4Q22 and for the full year 2022, a challenging environment for managers.
Private Markets

Managers See Declines but Outpace Benchmarks

Joe McGuane
Joe McGuane analyzes hedge fund performance in 3Q22.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.