Market turmoil this year has tested hedge funds but also allowed them to display resilience against market corrections.
Hedge fund investors pulled out more money from hedge funds than they put in, a recent Citco report covering Q2 showed.
The percentage of hedge funds that saw a positive return fell 7.4% to 33% compared to Q1.
However, hedge fund trade body Aima says performance was favourable compared to traditional strategies.
Tom Kehoe, global head of research and communications at Aima, told Funds Europe: "On average, hedge funds have lost 4% over the year, but by comparison, investors in equity markets have lost 13%. By way of another comparison, investors of balanced portfolios are down 11% year to date [and] at the end of June were down 16%."
Kehoe further pointed to some hedge fund strategies performing well. CTA and macro fund strategies were up, on average, 8% and 20% at one point.
"And this period is just one of many examples which demonstrate hedge fund's ability to navigate market corrections and protect investor wealth, including Q1 2020 when passive investors [in equities] were down 20%, but hedge funds, by comparison, reported down 5% and ended the year up 19%", said Kehoe.
The second quarter was dominated by financial turmoil amid high inflation and geopolitical crisis, which resulted in a further plunge in the market and hedge funds investing in equity markets suffered a net withdrawal of around $6.4 billion, according to the Citco report.
Previous periods of major turmoil include when equity markets lost half their value in 2008/2009 while hedge funds, on average, lost 20% over the same period, according to Kehoe. Further, the average hedge fund recovered its losses by October 2010, whereas the average balanced fund did not recover its losses until March 2013, some two-and-a-half years later, he says.
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