Hedge funds weathered volatility and the return of rising interest rates in 2021 to post double-digit weighted average returns overall for the year, according to research from the Citco group of companies (Citco).

Hedge funds weathered volatility and the return of rising interest rates in 2021 to post double-digit weighted average returns overall for the year, according to research from the Citco group of companies (Citco).

Analysing funds it administers, Citco’s 2021 Hedge Fund Report found that all fund strategies and AUA categories delivered positive returns last year, with the overall return coming in at 11.4 per cent.
 
The best-performing strategy was Event Driven, achieving a weighted average return of 27.3 per cent for the year. This was followed by Commodities strategies, which delivered 26.6 per cent. Overall, 75.6 per cent of funds delivered a positive annual return, just shy of the 77.6 per cent seen in 2020. Size continued to matter to performance overall, with larger funds outperforming smaller peers.
 
Investors and allocators added to hedge funds on the Citco platform in every quarter, with net inflows of USD37.3 billion, compared to USD17.8 billion in 2020. Private Capital Hybrid funds saw the largest inflows of USD27 billion across the year.
 
The report also shows the correlation between trades and volatility dropped sharply in 2021, bar a few short periods. Jumps in volume in the early months set a precedent for the remainder of the year, with volumes continuing to soar despite muted volatility.
 
In terms of activity across Treasury, the report showed a 59 per cent year-on-year increase in volumes to record levels for funds administered by Citco.