Hedge funds rebound in August as commodities and macro lead $100bn inflow run

Hedge funds experienced a significant rebound in August, with commodity and macro strategies driving performance. The industry saw inflows close to $100bn for the year, the closest yet to that target, according to Citco's latest Monthly Hedge Fund Update. The weighted average return across managed funds increased by 1.4% in August, with over three-quarters of funds delivering positive returns.

The year-to-date average return reached 11.3%, up from July's weaker performance. Commodities led the pack, generating a 4.2% weighted average return in August, while global macro funds followed with a 3.9% return. Equity strategies gained 2.2%, multi-strategy funds grew by 0.7%, and fixed income arbitrage saw a 0.5% gain. Event-driven strategies were the only category to post a decline in August, falling 1.9%.

Every fund size category saw positive performance, with mid-sized funds ($500m to $1bn AUA) leading at 2.6%, followed by $200m to $500m funds at 2%. The performance gap between the strongest and weakest funds narrowed to 8% from 9.9% in July. Investor demand for hedge funds continued to rise, with $10.3bn in August inflows, bringing the year-to-date total to $99.7bn.

Multi-strategy funds attracted the most new capital, receiving $6.7bn in August and $57.1bn year-to-date. Equity, fund of funds, and hybrid strategies each received about $1bn in net inflows, while arbitrage funds attracted $800m. Large funds with over $10bn in assets received $7.9bn in August, accounting for $77bn in cumulative inflows since the year began.

Smaller funds saw $1bn in August inflows, compared to $900m for funds between $1bn and $5bn and $500m for the $5bn to $10bn range. Europe and the Americas accounted for virtually all regional inflows, with Europe receiving $5.3bn and the Americas $5.1bn. Asian funds saw a $100m outflow. Trading activity eased from July's levels but remained higher than August 2025.

Average daily trade volumes dropped 5.9% month-on-month but were still 2.5% higher than the previous August. Equity swaps and equities led trading volumes, though their daily averages fell 11% and 4% respectively from July. Commodity futures options saw a notable increase, with volumes more than doubling month-over-month. Equity options and commodity futures also increased by 12% and 9% respectively.

Market volatility remained low, with the VIX declining by two points from July. Citco's middle-office team processed 62,700 treasury payments in August, down from July's record 74,303 but still 14% above August 2025. The third quarter was on track for another treasury payment volume record, reflecting the industry's reliance on third-party providers for non-core functions.

Citco's trading-ingestion infrastructure achieved a 97.1% straight-through-processing rate in August.