Key facts
- Hedge funds trading stocks achieved double-digit returns for the year so far.
- Stockpickers saw a 4% return in June, with fundamental analysis funds achieving their strongest quarterly performance on record.
- Successful strategies included focusing on healthcare, momentum trades, and fundamental analysis.
- Losses were incurred in oil prices and short bets, as well as volatile trading in major U.S. companies.
- Systematic model-based funds posted a 1.1% gain in June and 11.3% year-to-date.
Hedge funds experienced a strong performance in June, with stockpickers achieving significant returns driven by successful navigation of crowded trades and the application of fundamental analysis. According to a Goldman Sachs client note, these funds returned 4% in June, contributing to an 18.4% gain for the quarter, their best on record. Year-to-date returns for this group stood at 17.4%.
Key successful strategies included making larger bets, focusing on the healthcare sector, and joining trades that already possessed momentum. However, the month was not without its challenges. Volatile market conditions in June led to losses, particularly in oil prices which returned to pre-Iran war levels, and in short bets that failed to materialize as asset prices did not fall as anticipated. The Magnificent Seven stocks also faced a difficult June, with the Roundhill Magnificent Seven ETF falling 9%, its largest monthly decline in over a year.
Hedge funds employing systematic models to assess market dynamics saw a more modest 1.1% gain in June, bringing their year-to-date return to 11.3%. According to Winton, a $18 billion systematic fund, these traders experienced losses due to volatile trading in major U.S. companies and Chinese firms. Short positioning in fixed income, specifically long-dated U.S. Treasuries, also negatively impacted performance. Global macro strategies made gains in the Canadian dollar and Japanese yen, but these were outweighed by larger losses in the Australian dollar, sterling, and Norwegian krone.