Hedge Fund Data

Monthly hedge fund performance review – July 2023

22/08/2023
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Hedge fund performance was generally positive in July; the average hedge fund net return across all strategies was 1.05%. All hedge fund strategy groups had positive asset weighted average returns. Long biased was the strongest performing strategy in July and year-to-date. Equity markets rallied in response to data releases that indicated that inflationary pressures were decelerating. Hedge fund performance dispersion was tighter than that observed in June.

HEDGE FUNDS
Hedge fund compositeHedge fund performance was generally positive in July; the average hedge fund net return across all strategies was 1.05%. The strongest performing strategy during the month was long biased. All underlying strategies had positive average net asset weighted returns. Hedge fund performance dispersion was tighter than that observed in June.
Long-biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 2.98% in July, the strongest-performing strategy during the month. Sub-strategy returns were all positive. The best-performing sub-strategy for a was long biased – commodities, up 5.70%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned 0.10% on average in July. Sub-strategy returns varied from slightly negative to positive. Risk premia was the best-performing sub-strategy, up 1.30%.
Equity long/shortEquity long/short funds returned an average of 1.12% in July, benefiting from the rally in equity markets. Most sub-strategies had positive performance, with the exception of fundamental equity market neutral and European long/short, which experienced minor losses.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 1.19% in July. All sub-strategy returns were positive. The best performing sub-strategy was macro – commodities, which was up 2.64%.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.41% in July. Smaller funds, with an AUM of $0.5 – $1bn were the strongest performers.

MARKETS
Major eventsDecreasing inflationary pressures led to adjustments to market expectations of future interest rate hikes. The Fed bumped up interest rates by 25bps in July. The IMF revised upwards its expectations for global growth in 2023. This buoyed market sentiment, leading to another strong month for risk assets.
EquitiesGlobal equities were supported by risk-on sentiment following a data release indicating a significant reduction in the rate of US inflation. Most major equity indices ended the month with positive performance. Japanese equities were the exception, and were slightly negative.
Government bondsMost 10y government bond yields generally increased in June, in line with broader risk-on sentiment in markets. The US 2y/10y yield curve inversion (an indicator of market expectations of a recession) eased somewhat on news that US Q2 economic growth estimates were revised upwards in July. Japanese bond yields jumped at the end of the month after a landmark loosening of the BoJ’s yield curve control policy.
Corporate bondsMost corporate bond indices across the quality spectrum ended July with broadly positive performance. All major credit indices have positive performance year-to-date. Lower quality corporate credit outperformed amidst risk-on sentiment in markets.
CurrenciesThe US dollar weakened further in July, as the market expectations of future interest rate hikes by the Fed waned. The Japanese yen strengthened for the first month since March on speculation about the BoJ softening its monetary easing policy.
CommoditiesThe weaker US dollar supported precious metals prices in July. Natural gas prices fell, adding to the significant year-to-date losses. Oil prices rose, supported by production cuts and the improved global macroeconomic outlook. Wheat and corn experienced significant price volatility after Russia pulled out of the Black Sea grain deal.

The Hedge Fund Data Engine is a proprietary database maintained by Aurum Research Limited (“ARL”).  For information on index methodology, weighting and composition please refer to https://www.aurum.com/aurum-strategy-engine/. For definitions on how the Strategies and Sub-Strategies are defined please refer to https://www.aurum.com/hedge-fund-strategy-definitions/

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