Factbox-Hedge funds jump into volatile January to reap returns

Hedge Funds Capitalize on January Market Volatility for Gains

Hedge Fund Performance in January

By Nell Mackenzie

Factors Driving Market Volatility

LONDON, Feb 4 (Reuters) - Hedge funds posted positive returns in January thanks to ripples of market volatility stemming from U.S. military action in Venezuela, questions around the independence of the Federal Reserve and a cold snap that sent natural gas futures flying.

Performance of Multi-Strategy Funds

Performance globally rose by 2.2% in January, according to a JPMorgan client note dated Monday and seen by Reuters on Wednesday. That compares with returns of 2.5% last year, when hedge funds profited from crowded positions in U.S. equities and managed to avoid getting stung by a hefty selloff sparked by the rise of Chinese artificial intelligence model DeepSeek.

Impact of Natural Gas Prices

Stock pickers trading long and short positions in global equities posted a gain of 2.7%, while hedge funds trading many different strategies under one roof returned between 1.6 and 3.2% and quantitative hedge funds were likely down around 1% in aggregate, the note said. 

The U.S. captured Venezuelan President Nicolas Maduro on January 3 after which the two countries reached a deal to export up to $2 billion worth of Venezuelan crude to the United States. 

Investors have ramped up bets on higher long‑dated Treasury yields and a steeper yield curve after incoming Federal Reserve Chair Kevin Warsh was announced as U.S. President Donald Trump's pick to lead the central bank. 

And separately, natural gas futures soared 140% between January 20 and 28 as extreme cold in the United States boosted heating demand to near-record highs.

This gave hedge funds lots to trade. Some of the biggest multi-strategy funds like Balyasny, Citadel and Point72 returned between 1% and 3%. Citadel and Point72 declined to comment on the numbers. 

(Reporting by Nell Mackenzie; Editing by Amanda Cooper, Aidan Lewis)