Global hedge funds recorded their best first-half showing since 2013, with returns lifted by successful trades in healthcare, technology and energy, data from hedge fund analytics firm PivotalPath showed. April stood out in particular - hedge funds returned 3.7% in that month, the strongest April on PivotalPath's record.
Stock-focused hedge funds ended June with year-to-date returns in double digits, according to a client note from Goldman Sachs. The Goldman note reported that stockpickers generated a 4% gain in June. It also noted that hedge funds relying on fundamental analysis of company financials posted an 18.4% return for the quarter - the strongest quarterly outcome on Goldman Sachs' records - and finished the year to date up 17.4%.
Goldman cited larger, concentrated wagers, successful healthcare bets and joining existing momentum trades as factors behind these gains. However, the note also flagged sources of loss that emerged in June: a spike in market volatility late in the month, trading activity in a surging South Korean market, and short positions that became trapped when asset prices did not fall as anticipated.
The technology segment saw a mixed picture. The second quarter was the best on record for the U.S. SOX chip index, but June proved punishing for the so-called Magnificent Seven. The Roundhill Magnificent Seven ETF fell 9% in June, its largest monthly decline in over a year.
Macro conditions also played a role. Oil prices returned to pre-Iran war levels and market pricing suggests at least one Federal Reserve rate hike by year-end, although the latest U.S. jobs print moderated some traders' expectations for further tightening.
Hedge funds that use systematic, model-driven approaches produced a 1.1% gain in June after suffering losses that occurred toward the end of the month, the Goldman note said. That systematic group has delivered an 11.3% return for the year to date, as reported by Goldman.
A separate note from Winton, a systematic fund with $18 billion in assets that tracks competitor performance, provided additional detail on where systematic strategies struggled. Winton said volatility among the largest U.S. companies and Chinese firms contributed to losses for systematic traders. Short positioning in fixed income - notably in long-dated U.S. Treasuries - also detracted from returns.
Winton further reported divergent currency outcomes for diversified, multi-asset systematic managers such as trend followers and commodity trading advisers. These funds made money on positions in the Canadian dollar and Japanese yen, but larger losses in the Australian dollar, sterling and the Norwegian krone outweighed those gains.
The Winton note highlighted structural differences across systematic approaches. Many systematic strategies impose minimum time limits for how long positions must be held. Faster strategies, with shorter holding-period constraints, were generally better able to navigate the choppier markets of June.
Detailed performance takeaways - PivotalPath reported a best-first-half result since 2013, with April returning 3.7%, a record for that month. Goldman Sachs' client note recorded a 4% return for stockpickers in June and an 18.4% quarterly return for fundamental stock-focused funds (17.4% YTD). Systematic model strategies returned 1.1% in June and 11.3% YTD, per Goldman. The Roundhill Magnificent Seven ETF declined 9% in June.
Overall, the first half performance was dominated by gains in healthcare, technology and energy trades, while June volatility and certain short and fixed-income positions created notable pockets of underperformance.