Hedge Fund Trading Hits Record High

By the end of June, trade volumes were up 9.8 percent from May, 2.2 percent higher than the previous record high hit in March, Citco reported.

Michael Nagle/Bloomberg

Michael Nagle/Bloomberg

Hedge funds, like all active managers, need markets to move if they want to outperform benchmarks and peers. The year’s rocky markets gave them a chance to show their skills.

According to Citco’s quarterly hedge fund report released Tuesday, the number of hedge fund trades in the second quarter was the highest ever recorded by the technology services firm, rising 2.9 percent from the previous quarter. The feverish trading was driven largely by market volatility during the period.

The report said that April marked the beginning of a trend that continued throughout the rest of the quarter. In the spring, high volatility and sell-offs in the stock markets made for a “sustained period of trading activity.” While the daily average trading volume was down 12 percent in April, compared to March, it was still 11 percent higher than in April 2021.

But for all their trading, hedge funds generally haven’t fared well in the volatile environment. In the second quarter, funds lost 6.81 percent (on a weighted-average basis), with only 33 percent delivering a positive return. During the first quarter, 40 percent of hedge funds reported gains. As was the case in the first quarter, the largest funds saw the biggest losses, with hedge funds in the $3 billion-and-above bracket losing 8.1 percent. Hedge funds with $200 million to $500 million in assets, lost 6.4 percent.

Still, returns in July were a different story. Hedge fund research and data firm PivotalPath reported that its composite index gained 0.9 percent in July and is down 2.2 percent for the year. PivotalPath’s equity diversified index added 2.9 percent in July and is down 6.8 percent year-to-date.

Against a backdrop of steady declines in performance, trading volumes in May were up 6.2 percent month-over-month and 14.3 percent year-over-year. At the same time, volatility was the highest yet seen in 2022, with the VIX, a volatility benchmark, at 29.25. For context, the VIX index in March 2022 — when the markets were roiled by Russia’s initial invasion of Ukraine — came in at an average of 26.9.


By the end of June with cryptocurrencies swinging wildly, trade volumes hit a record high, up 9.8 percent from May and 2.2 percent higher than the previous record high in March 2022.