Hedge funds closed June with year-to-date returns in double digits, supported primarily by managers relying on company-level analysis and concentrated stock selection, according to a client note from Goldman Sachs seen this week. The Goldman note reported that stockpicking strategies delivered a 4% return for June.
Within that group, hedge funds using fundamental analysis of corporate finances registered particularly strong results, posting an 18.4% return for the quarter - the best quarterly performance on Goldman Sachs' records - and a 17.4% gain for the year to date. Goldman attributed success to larger, conviction-sized positions, active wagers in the healthcare sector, and participating in trades that already had momentum.
However, not all strategies fared as well. Goldman highlighted that losses during June were driven by sharp market swings, a rally in South Korean equities and funds that remained positioned for falling prices through short bets. June proved contrasting for different equity pockets: the U.S. SOX chip index logged its strongest quarter on record, but the Magnificent Seven names endured a difficult month, with the Roundhill Magnificent Seven ETF down 9% in June - its largest monthly drop in over a year.
Commodities and monetary policy expectations also influenced returns. Oil prices moved back to levels seen before the Iran war-related volatility, and market pricing continued to reflect the expectation of at least one Federal Reserve rate hike by the end of the year, even as the most recent U.S. employment report moderated some traders' bets on the timing of additional rate increases.
Systematic managers, which deploy model-driven approaches to assess market dynamics, experienced a more mixed outcome. Goldman reported that these strategies posted a 1.1% gain in June after suffering losses late in the month, leaving them with an 11.3% return for the year to date.
A separate note from Winton, a systematic fund overseeing roughly $18 billion and which tracks competitor performance, attributed its June weakness to heightened volatility among the largest U.S. companies and select Chinese firms. Winton said that short positions in fixed income - especially in long-dated U.S. Treasuries - detracted from returns.
Winton also described divergent outcomes across currencies and multi-asset trend-following approaches. Trend followers and commodity trading advisers posted gains in the Canadian dollar and Japanese yen, but these were outweighed by larger losses in the Australian dollar, sterling and Norwegian krone.
The Winton note pointed to an operational constraint within many systematic strategies: rules or limits on minimum holding periods. Faster-paced strategies that can exit and re-enter positions quickly coped better with the choppier conditions in June, whereas longer-duration systematic approaches suffered more from abrupt market moves.
Markets and strategies in focus
Overall, the month highlighted a split between discretionary, fundamentally driven funds that leveraged concentrated and momentum-aligned positions, and model-based systematic funds that faced pressure from rapid swings in large-cap equities, fixed income positioning and currency moves. Performance drivers included sector-specific bets, regional equity rallies and shifts in commodity and interest-rate expectations.