2023 Hedge Fund Report – A Year in Review - Citco (2024)

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2023 Hedge Fund Report – A Year in Review - Citco? ›

Citco said equity hedge fund strategies had a weighted average return of 21.91% for 2023, followed by fixed income arbitrage at 12.63% and multi-strategy at 12.56%. Overall, the weighted average return for funds was 14.66% was welcome news following the -7.02% return logged in a challenging 2022.

Respondents to BNP Paribas' annual 2024 Alternative Investment Survey reported that in 2023 their hedge fund portfolios delivered an average return of 6.67%, 1.5% below their target return, with equity long/short funds focused on the Americas or on technology, media and telecommunications delivering the best ...

The average annual return on investment for investors in a typical hedge fund is around 8 - 10 % . This can vary depending on the specific fund and market conditions , but historically , hedge funds have outperformed other types of investments such as stocks and bonds .

A hedge fund administrator handles functions like accounting, reporting, operations, technology, compliance, and investor services. This allows the fund manager to focus entirely on investing and client relations. They provide custom solutions based on each fund's needs across people, processes, and software.

On the plus side, the 2.2% return in February 2024 offset the redemptions. As a result, the hedge industry saw its assets under management expand by $74 billion to a $3.59 trillion total. The second month of the year has long been a harbinger in terms of flows.

Data shows that hedge funds consistently underperformed the S&P 500 every year since 2011. The average annual return for hedge funds was about 4.956%, while the S&P 500 averaged 14.4%.

The 2 and 20 is a hedge fund compensation structure consisting of a management fee and a performance fee. 2% represents a management fee which is applied to the total assets under management. A 20% performance fee is charged on the profits that the hedge fund generates, beyond a specified minimum threshold.

Citadel, which ranked second in 2023, made $8.1 billion in profits after bringing in a record-breaking $16 billion in 2022. Its $74 billion in gains since inception rank it as the most successful hedge fund in history.

As measured by a more traditional way of assessing returns, the top grouping gained 10.5% in 2023, outperforming the average hedge fund which returned 6.4%. Over the past three years, the top 20 have generated 83% of the absolute gains made by all hedge fund managers, the report found.

How do hedge fund managers get so rich? ›

Hedge funds make money as part of a fee structure paid by fund investors based on assets under management (AUM). Funds typically receive a flat fee plus a percentage of positive returns that exceed some benchmark or hurdle rate.

In terms of everyday responsibilities, the main duties of a fund manager include building financial models, meeting with clients, and analysing investments. At a higher level, they oversee the hedge fund's daily operations. This might include risk management, marketing, sales, and cash flow forecasting.

Poor Operations Management. According to a Capco study, 50% of hedge funds shut down because of operational failures. Investment issues are the second leading reason for hedge fund closures at 38%. When breaking down everything that can go wrong, operations makes its case for number one.

It shows that liquidated and all defunct single-manager hedge funds account for less than a quarter and almost half of all single-manager hedge funds in the database respectively. Moreover, the increase in cumulative liquidation and attrition rates slows down significantly after funds become more than ten years old.

In his 2022 Survey of the Top 50 Hedge Funds, Uhlfelder said the average age of the top 50 funds is 13.5 years — almost triple the lifespan of the average hedge fund. Further, many investors may be surprised to learn that about half of the list has typically been smaller funds.

Key Stats: 2023 Stock and Bond Market Performance

U.S. Stocks rose 26.4% (including dividends), the biggest rally in the US Market Index since 2019. Stocks were up 12.1% in the fourth quarter, the index's best quarterly performance since late 2020.

The first quarter of 2024 has been unusually strong for hedge fund performance, with gains across many strategies, not least in those exposed to momentum in either time-series or cross-sectional form. Equity markets have ground higher as economic data continues to suggest a more benign backdrop than expected.

The overall average relative performance of all equity funds compared to their fund manager benchmarks for 2023 is negative 2.40%. This underperformance needs to be seen in the light of the fees and expenses paid by the fund, since indices and benchmarks do not include any fees and expenses.

No doubt, this increase in market interest is reassuring, and several hedge funds have seen performance soar due to the pandemic-induced volatility. However, other strategies have suffered the opposite fate.