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Analysing global hedge fund industry performance patterns, trade and treasury volumes and investor flow trends, Citco's Q2 2021 Hedge Fund Report found that all fund strategies delivered positive returns in Q2, delivering an overall 6% weighted average return versus 2.75% in Q1. The best performing strategy was commodities, achieving a weighted average return of 8.33% for the quarter. Overall, the volume of funds delivering a positive annual return increased from 73.4% in Q1 to 82.03% in Q2, with larger funds sized $3B+ in assets under administration producing the best returns at 7.69% and higher weighted average returns in most categories.

A strong correlation exists between market volatility and trade volumes. Citco observed a dip in trade volumes from the record peaks of March, however, Q2 ended with an 8.5% increase in year-to-date volumes up to June compared to the same period in 2020. Trading of Equity Swaps was up 44% in Q2 2021 relative to Q2 2020, indicating a broader use of the product amongst the hedge fund industry.

Increased trade activity was supported by increased investor confidence in alternative investments. Gross subscriptions for Citco-administered funds were $50.5B in Q2, with a clear preference for allocations to MultiStrategy, Global Macro, Private Equity hybrids and Funds of Funds, while Equities and Arbitrage experienced net outflows. Reversing a recent trend, managers in Asia had outflows, while their peers in Europe and North America all added to their capital base.

Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Limited, said: "With elevated trade activity and capital inflows industry-wide, we continue to emphasise the importance of robust infrastructure and operations for the hedge fund industry. We are seeing strong appetite from managers to better leverage outsourced middle office solutions and expertise availing of streamlined, digitised and more transparent treasury and accounts payable workflows. In this environment, Citco's proprietary technology and specialist services will continue to support the global alternatives industry through 2021 and beyond."