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  • Writer's pictureRealFacts Editorial Team

Hedge Funds Underperform in First Half of 2024

Hedge funds written on blocks

Investors have various options for allocating their funds and choosing who should manage their money. Some prefer a low-risk approach, opting to keep cash in money market funds and certificates of deposit (CDs). Others may choose passive investments in broad market exchange-traded funds (ETFs) that track common stock market indexes, being content with the market's overall returns. Another strategy involves picking individual stocks and trading options for specific companies. Wealthier individuals and institutions often invest their capital in hedge funds, aiming to achieve returns that outperform the overall market.

Hedge funds are investment firms that use a variety of strategies, including leverage, derivatives, and short selling, to achieve high returns for their investors. They make money by charging management fees and performance fees, typically a percentage of the assets under management and a share of the profits earned. While investors allocate funds to hedge funds hoping for higher returns, these funds often fail to deliver the expected results. In the first half of 2024, many large hedge funds failed to outperform the S&P 500, one of the most widely available and commonly used investment vehicles for investors. 

According to data firm HFR, hedge funds returned only 5% in the first half of the year, with a 0.2% loss in June, and event-driven strategies being the most underperforming. In contrast, the S&P 500 surged over 15% through June. Morgan Stanley’s team wrote in a July 1st note to clients, “With the first half of 2024 coming to a close, hedge funds across most strategies continue to show gains in the mid-to-high single-digits.” Morgan Stanley also noted that Americas-based long-short hedge funds gained only 40 basis points in June, capturing just 10% of the upside compared to their benchmark, the S&P 500. The following notable multi-manager hedge funds each underperformed the S&P 500’s stellar 15% gains in the first half of 2024.

Citadel Wellington: 8.1% 

Millennium: 6.9% 

Point72: 8.7% 

Balyasny Atlas Enhanced: 5.5% 

Schonfeld Strategic Advisors Partners: 10.3% 

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