Hedge fund administrator Citco reported that March 2021 saw a record level of trading volume among its clients, driven by a 51% uptick in equity swaps trading over the last 12 months.
At the beginning of the pandemic in March 2020, Citco saw a spike in trading volume as volatility soared. By comparison though the administrator saw a consistently brisk amount of volume in the first part of 2021 that led to this March having the heaviest trade volume ever observed, topping the previous record by 4.1%
According to the global administration firm’s first quarter 2021 report, credit default swaps saw an increase in trading as well with a wider client base taking part and an upswell of 40% higher volume for the year ending March 31, 2021.
“Only time will tell if these record volumes speak to increased investor appetite for hedge funds, however – with a notable uptick in activity across the sector in terms of new starts — the portents are encouraging,” wrote Declan Quilligan, head of hedge fund services at Citco, which administers over $1 trillion.
Net capital inflows for the funds served by Citco were $9 billion for the first quarter of 2021. Managers handling $5 billion or less represented all these inflows, with the most popular strategies being global macro, multi-strategy and hybrid funds.
On a geographic basis, Asian and European managers saw all the inflows, while North American funds reported net outflows during the quarter.
It comes at a time when hedge fund performance is seemingly on an upswing as well despite the fact that volatility as measured by the VIX is down considerably from the early days of the pandemic. Also 2020 was a strong year with positive returns for almost three quarters of funds.
Overall, more than 73% of Citco administered funds were up on an annualized basis for the first quarter 2021.
The best performing strategy was event-driven, with an average weighted return of 8.25% for the quarter. Commodities did well too with returning 7.24%, while global macro strategies were up 5.3% on an average weighted return basis.