Hedge funds investing in bonds are dealing with a choppy August, and didn’t come into the late summer on a hot streak either.
This month has brought some fresh challenges. Credit investors have had to navigate the unprecedented and unforeseen intervention in the Treasurys market by Treasury Secretary Scott Bessent, who is trying to lower interest rates, as well as choppiness in the corporate bond market stemming from the ramifications of Guggenheim CEO Mark Walter’s asset sell-off, including the NBA’s Los Angeles Lakers.
Debt-focused managers did not come into this turbulent stretch in a strong position. Credit hedge funds are up just 3.5% on average through July, according to industry data tracker PivotalPath, significantly below the average stockpicking fund, which has more than doubled the typical bond fund. Now, market turmoil will test managers’ ability to thrive amid volatility.
Last month in particular was a tough one for many bond investors, when there was a flood of new corporate bond issuances from Big Tech companies funding artificial intelligence projects. While the average credit manager was flat for the third quarter’s start, there were several notable names that lost money in July.
Rising star Hamza Lemssouguer lost roughly 8% in July in the flagship fund at his firm, Arini Capital Management, a person close to the manager confirmed to Business Insider. That put the strategy in the red for the year, the person said, though the fund has pared back some of the losses in August with a 3.5% gain through Thursday. Arini’s July performance was first reported by Bloomberg.
Ken Griffin’s Citadel enjoyed a record-breaking July from the equities side of its business, thanks in part to the discounted purchase of Leopold Aschenbrenner’s Situational Awareness portfolio. But the firm’s standalone fixed-income fund lost money in July, a person familiar with the Miami-based manager told Business Insider. The fixed-income fund was down 0.3% in July and has lost 0.4% in 2026.
Elsewhere in the multistrategy sector, Marshall Wace’s nascent credit unit has had a rocky start, as Business Insider recently reported, and the firm’s Alpha Fund, which the credit portfolios fed into, was down 3% in July. Fixed-income-heavy ExodusPoint was down 0.9% in July and is up 3.5% on the year, trailing its peers that are more equity-focused, such as Schonfeld and Point72.
At bond-investing giant PIMCO, the California firm’s $5.9 billion Tactical Opportunities hedge fund slipped in July, falling 0.2%, according to HSBC’s Hedge Weekly report, though the strategy — which invests in public and private debt — is still up nearly 7% on the year. RBC’s BlueBay unit is down 1.4% on the year through July in its long-short credit fund, the report states.
Meanwhile, Carronade Capital, run by Elliott Management alum Dan Gropper, lost 4.2% last month, according to a report from Societe Generale. The young fund, which manages close to $4 billion and invests in credit restructurings and other debt instruments, is up 0.8% in 2026, the report stated.
The managers mentioned either declined to comment or did not immediately respond to requests for comment.
