Hedge funds navigate market volatility with double-digit gains

Stock-focused managers leaned into momentum, particularly within the healthcare sector, to secure a 4% gain in June alone. This brought year-to-date returns for fundamental long-short funds to 17.4%. However, the strategy was not without risk; managers struggled as the Magnificent Seven, which had driven market growth, saw its Roundhill ETF fall 9% in its worst month in over a year.

Systematic funds, which rely on algorithmic models to dictate market entries, trailed their fundamental counterparts with an 11.3% return year-to-date and a 1.1% gain in June. According to Winton, a $18 billion systematic fund, losses were exacerbated by short positions in long-dated U.S. Treasuries and volatile trading in Chinese equities. While commodity-focused traders found success in the Canadian dollar and Japanese yen, those gains were largely offset by losses in sterling, the Australian dollar, and the Norwegian krone. Ultimately, the ability to exit trades quickly proved to be a decisive factor in weathering the month's abrupt market shifts.