Thursday, 31 July 2014
Last updated 6 hours ago
Jul 19 2013 | 6:31am ET
The global hedge fund industry is bigger than ever, reaching a massive $2.4 trillion in investments at the end of the second quarter. This is the fourth consecutive quarter of growth, according to the latest HFR Global Hedge Fund Industry Report.
Hedge funds that took in new capital saw inflows of $55.9 billion during the quarter, while funds that experienced redemptions booked outflows totaling $41.4 billion, resulting in a net inflow of $14.5 billion, which is in line with the Q1 inflow of $15.2 billion.
As the quarter concluded with a sharp rise in bond yields and widening high yield credit spreads, investors exhibited a preference for credit and interest rate sensitive event driven and relative value arbitrage strategies, with these receiving over $14 billion of combined inflows in Q2 and nearly $25 billion in inflows for the first half of the year.
With contributions from high performing activist strategies and a dynamic M&A and corporate actions environment, the HFRI Event Driven Index led other main strategy areas for both Q2 and H1, gaining 1.8 and 5.7 percent, respectively.
Recent inflows represent a reversal for event strategies, which experienced net outflows of $6.6 billion in 2012.
Investors allocated $3.6 billion of new capital to macro strategies in 2Q13, despite the HFRI Macro Index posting a decline of -0.5 percent in the first half of the year.
Investors withdrew net $1.3 billion from equity hedge strategies in Q2, partially reversing a similar inflow from Q1 and resuming the outflow trend for equity strategies from 2012. HFRI Equity Hedge Index gained 5.3 percent in the first half, while sub-indices HFRI Sector: Technology/Healthcare and Fundamental Value gained 8.9 and 8.6 percent, respectively.
Money Flowing In Regardless Of Fund Size
Positive capital inflows occurred across all fund sizes, with firms below $500 million in AUM experiencing combined inflows of approximately $2.4 billion. The industry’s largest firms, those in excess of $5 billion in AUM, experienced net inflows of $6.1 billion, while firms between $1 and $5 billion experienced inflows of $5.8 billion.
Investors withdrew $4.6 billion from funds of hedge funds in Q2, bringing first half fund of fund redemptions to $9.6 billion.
10,000 Funds And Growing
In addition to an increase in the industry’s AUM, the number of hedge funds is also on the rise. According to HFR, the total number of hedge funds increased to over 10,000 funds for the first time since 2006, at which time a record number of 10,096 funds existed.
“Hedge fund managers and investors continue to position for a post-QE environment dominated by fundamental, mean-reverting and trend-following factors, with these in contrast to the macro policy and stimulus-dominated environment of recent quarters,” said Kenneth Heinz, president of HFR. “As this environment develops, and concurrent with relaxation of certain marketing restrictions on hedge funds, investor preferences for sophisticated, specialized long/short exposure to these shifting dynamics are likely to drive hedge fund industry growth in 2H13.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…