Hedge funds deliver mixed September results on AI swings

By Anirban Sen and Summer Zhen

HONG KONG/NEW YORK, Oct 7 (Reuters) - Global hedge funds delivered mixed results in September after surging bond yields, higher oil prices and swings in AI shares drove selling, while quant strategies posted gains, according to prime brokerage notes and investors.

Global fundamental equity long-short funds on average lost 0.55% last month, Goldman Sachs Prime Services team said in a note, although they outperformed the MSCI World Index, which fell 1.3%.

In contrast, computer-driven systematic equity long-short funds rose 3.46% last month, marking their best monthly performance this year, according to Goldman Sachs. 

Central bank headlines dominated September. The US Federal Reserve raised interest rates for the first time since 2023 and signalled more rate hikes in coming months. The US-Israeli war on Iran pushed oil prices higher and sent US Treasury yields to two-decade highs.

AI SWINGS COMPLICATE SHORT-TERM TRADES

Expectations of a slowdown in AI spending also triggered swings in crowded technology positions from the US to South Korea, complicating short-term trading.

In the US, hedge funds sold most sectors in September, but divergence emerged within the tech sector where electronic equipment and hardware were sold off, while semiconductor equipment and software attracted strong inflows, Goldman Sachs said. 

Large multi-strategy funds managed modest gains. Citadel's flagship Wellington fund ended September up 1.1%, leaving it 13.4% higher for the year.

Balyasny went up 0.1% while Millennium was flat last month.

In Asia, Morgan Stanley said macro uncertainty limited hedge fund performance in September. The bank estimated Asian hedge funds across strategies fell 0.6% last month through September 25, compared with a 0.2% decline globally. 

Some strategies profited from the sharp moves in commodities and rates. 

Bridgewater Associates' Pure Alpha macro fund returned 18.4% in the first nine months of the year.

At the $22 billion Graham Capital, quantitative strategies stand out, with its Quant Macro fund gaining 5.36% in September and 21.89% year-to-date, while its Tactical Trend fund returned 3.26% for the month and 31.16% for the year. 

Trend-following hedge funds were among the biggest winners in September with the Société Générale trend index gaining more than 4%. 

Short fixed income and long energy positions largely drove the gain, according to Winton Group.

Analysts said the rate-hiking environment could create greater divergence across the hedge fund industry.  

"Some benefit directly from higher short-term rates, while others face higher financing costs that can materially reduce returns," said Don Steinbrugge, CEO at Agecroft Partners. 

Here are some of ​the monthly and YTD returns:

Fund Name Strategy September YTD

Citadel Tactical Multi-strategy 2.2% 28%

Trading

Citadel Multi-strategy 1.1% 13.4%

Wellington

Citadel Equities Multi-strategy 1% 24.5%

Millennium Multi-strategy 0% 8.1%

Balyasny Multi-strategy 0.1% 0.7%

Bridgewater Pure Macro 18.4%

Alpha

Graham Capital Macro 0.13% 3.02%

Absolute Return

Graham Capital Quant 3.26% 31.16%

Tactical Trend

Graham Capital Quant 5.36% 21.89%

Quant Macro

Graham Capital Macro 1.33% 8.2%

Proprietary

Matrix

Glazer Enhanced Event Driven 0.05% 6.55%

Fund

Dymon Asia Multi-strategy 0.7% 7%

Polymer Asia Multi-strategy 0.8% 11.3%

Pinpoint Multi- Multi-strategy -1.5% 5.8%

strategy

CFM Discus Multi-strategy 3.1% 21.6%

CFM Stratus Multi-strategy 2.9% 12%

CFM Systematic Macro 3.3% 23.3%

Global Macro

CFM Cumulus Multi-strategy 3.3% 14.4%

Source: Reuters reporting

(Reporting by Anirban Sen and Summer Zhen; Editing by Emelia Sithole-Matarise, Barbara Lewis and Shri Navaratnam)