Hedge funds ride August highs to keep returns positive

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(Clarifies timing of Goldman Sachs note which went to clients on September 2, not this week in paragraph 3)

By Nell Mackenzie

LONDON (Reuters) – Hedge fund returns were buoyed in August as stock markets raced to fresh highs, particularly in the United States and Asia, and shares in health care and technology industries rallied, bank reports and sources familiar with the funds suggest.

World stocks rose to record highs last month and climbed over 3.5%.

Hedge fund stock pickers returned over 2.2% in August and are up just over 10% for the year so far, said a Goldman Sachs note to clients on September 2.  

Systematic hedge funds, which use algorithms to trade, returned almost 2.4% for the month and are now up 12.3% for the year to August-end, the note showed.

Hedge fund leverage, an indication of how actively hedge funds trade, declined across all regions into September, suggesting hedge funds turned cautious despite the anticipated U.S. rate cut later in September, said the Goldman note.

Trading flows declined, added a separate note by JPMorgan.

Hedge funds sold stocks in all regions apart from China and to a lesser extent Taiwan, India and South Korea. Emerging markets Asia, which includes these countries, saw record hedge fund stock buying, Goldman said.

British hedge fund Marshall Wace, which manages over $70 billion in assets, returned 0.41% in its Eureka Fund in August and 1.95% in its Market Neutral Tops fund.

U.S. multi-strats also returned positive results with Citadel’s Wellington fund up 0.9% for August and 4.8% higher for the year so far. Millennium Management returned 1.2% for August and was up 4.4% for the year to August-end.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe, Alexandra Hudson)