Hedge Fund Losses Accelerate During Second Quarter

Hedge funds lost ground again during this year’s second quarter, according to Citco data, which show that the hedge funds the Citco group administers lost 6.81% for the three months ending June 30, after declining 3.23% in the first quarter.

In addition to the quarterly loss, the trend of net inflows into hedge funds ended, which a Citco report says had been the case each quarter of 2021 and in the first quarter of 2022. The data also show that 32.81% of funds delivered a positive return during the second quarter, down from 40.21% in the first quarter.

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The “event driven” sector of the hedge fund industry, which was among the top performers last quarter, was the worst performer in the second quarter, losing 17.04%, followed by equities and multi strategy, which declined 7.98% and 7.52%, respectively, while fixed-income arbitrage was down 4.03%. Meanwhile, ccommodities and global macro were the only categories with positive gains, returning 4.58% and 0.79%, respectively.

As was the case in the first quarter, the report says, the largest funds suffered the biggest losses, as hedge funds with $3 billion or more lost 8.14%, followed by hedge funds with $200 million to $500 million, which dropped 6.36%. Citco’s report notes that this is in sharp contrast to last year, when the largest hedge funds were consistently the top performers.

There were a total of $7.8 billion of net redemptions to Citco-administered funds in the second quarter, with gross subscriptions of $40.1 billion and gross redemptions of $47.9 billion. However, the report notes one trend that has stayed consistent with 2021 and the first quarter of 2022: There were net inflows for the months intra-quarter, with the quarter-end trading cycle experiencing outflows.

“For example, subscriptions and redemptions cancelled each other out at $10.9 billion each in April, with $3 billion of net subscriptions in May and $10.9 billion of net redemptions in June,” says the report.

Despite the increase in losses, Citco’s report says some signs indicate things could turn around in the third quarter.

“Although the hedge fund sector continued to see pullback in terms of performance across most strategies in the second quarter,” Declan Quilligan, head of hedge fund services at Citco Fund Services, said in a statement, “our most recent data for July shows a post-Q2 swing back into positive territory for almost all strategies – with 69.9% of funds posting positive returns.”

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Tags: Citco, Commodities, Declan Quilligan, event driven, Hedge Fund, hybrid funds, Q2, second quarter

The Minnesota State Board of Investment has named Jill Schurtz to succeed the departing Mansco Perry III as executive director and CIO to manage the board’s $124.8 billion in state pension and other funds, according to a news release.

In December of last year, Perry announced that he would be retiring at the end of 2022 after having led the pension fund since 2013. Under his stewardship, the state’s pension fund has nearly doubled from $68 billion. The Minnesota SBI is responsible for selecting the investments for the pension plan assets of the Minnesota State Retirement System.

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Schurtz joins the Minnesota SBI from the St. Paul Teachers’ Retirement Fund Association, where she was CIO and executive director beginning in 2014, and managed the fund’s $1.2 billion investment program and $120 million of annual pension benefits. Prior to St. Paul, Schurtz was CEO of New York-based asset management firm Robeco-Sage, having been promoted from chief operating officer. Before that, she was a director at Knight Equity Markets, and prior to that was an attorney at the law firm of Skadden, Arps, Slate, Meagher & Flom.

She was also vice president, investment banking at U.S. Bancorp Piper Jaffray, and before embarking on a financial career was a commissioned officer in the U.S. Army for seven years, where she rose to the rank of captain. Schurtz is currently a member of construction engineering firm M.A. Mortenson’s board of directors and chair of its investment committee, and is a member of Alerus’ board of directors. She is also on financial planner Okabena Investment Services’ investment advisory committee.

Schurtz is a graduate of the United States Military Academy, West Point, and received her law degree from Columbia Law School.

Perry, who was given CIO’s Lifetime Achievement Award in 2018, leaves after a storied career. When comparing his returns with other public pension funds with at least $20 billion, Perry’s plan has been ranked in the top 1% for the past 10 years, according to the Wilshire Trust Universe Comparison Service.