Inventory selecting hedge funds submit highest common returns since 2020, says Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) – International hedge funds taking lengthy and brief bets on shares final yr sported their highest common returns since 2020, Goldman Sachs stated in a be aware, attributing the end result to regular returns amid unstable markets.

These hedge funds’ complete weighted common return got here in at 12.75% for 2024, Goldman Sachs stated in a non-public be aware to purchasers on Thursday that was seen by Reuters Friday.

Elementary fairness managers’ weighted common in 2020 was 22.53%, in keeping with a Goldman be aware from December 2022.

This yr’s returns didn’t beat benchmark inventory indices such because the S&P 500, which surged over 20% in 2024 and notched up a two-year soar of round 53% within the strongest back-to-back annual efficiency since 1998.

Elementary equities hedge funds, nonetheless, take lengthy and brief positions, betting that some shares may rise and a few may fall. A brief place expects an asset to say no in worth.

In 2024, being each brief and lengthy typically price portfolios. On common, hedge funds’ brief concepts trended downwards in efficiency from July, information within the Goldman be aware confirmed.

As one of many world’s largest prime brokerages, Goldman is ready to monitor developments in equities flows and performances. Prime brokers present companies to hedge funds, corresponding to leverage and buying and selling.

Systematic funds, buying and selling shares with the assistance of algorithms and preferring market indicators as buying and selling prompts, slightly than firm fundamentals, posted a roughly 20% return for the yr, their greatest since 2022, stated the primary be aware.

“It might be argued that 2024 was the yr of the inventory picker, with fairness hedge funds enjoying dispersion effectively and actually leaning into artistic shorting methods and a cautious use of leverage to drive returns,” stated Jon Caplis, CEO of hedge fund analysis agency PivotalPath.

These international hedge funds ended 2024 with increased leverage ranges; 190% gross and 56% internet, stated Goldman Sachs. Gross leverage consists of preliminary investor cash and buying and selling positions, the online exhibits the distinction between lengthy and brief trades.

These rose from 2023, which completed with 178% gross and 50% internet leverage ranges, stated the Goldman be aware from 2022.