Hedge funds trading stocks finished June with double-digit returns for the year so far, helped by their ability to successfully navigate already crowded trades, according to a Goldman Sachs client note. Stockpickers returned 4% last month, said the Goldman note. Those hedge funds that use fundamental analysis to assess a company’s financial health posted an 18.4% return for the quarter, their strongest performance on Goldman’s records.

Hedge Fund Performance

Their year-to-date result was slightly less at 17.4%. Bigger bets, wagers on healthcare, and joining trades that already had momentum proved successful, said Goldman. Losses stemmed from how volatile markets turned in June, trading in a surging South Korean market and getting stuck in short bets that asset prices would fall, said the bank.

The second quarter was the best on record for the U.S. SOX chip index, but June was the worst month for the Magnificent Seven. The Roundhill Magnificent Seven ETF fell 9% in June, its biggest monthly drop in over a year. Oil prices have returned to pre-Iran war levels and markets expect at least one Federal Reserve rate-hike by year-end, even as the latest U.S. jobs number tempered traders’ rate hike bets.

Systematic Traders

Hedge funds that use systematic models assessing market dynamics to pick trades were left with a 1.1% gain in June after losses that came just at month’s end. This group gained an 11.3% return for the year to date, according to Goldman. For systematic traders, losses came from volatile trading in the biggest U.S. companies and Chinese firms, said a separate note from the $18 billion hedge fund Winton, a systematic fund which tracks the performance of its competitors.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.