According to the August 2015 Preqin Hedge Fund Manager Outlook, if you are a major hedge fund manager, the “future’s so bright you gotta wear shades.” The Preqin report highlights that the first half of 2015 was solid for the hedge fund industry, which saw strong inflows, minimal additional regulatory issues and which appears poised to take advantage of market volatility in the second half of the year.
Hedge funds saw large inflows in the first half of 2015
The Preqin report points out that the hedge fund industry as a whole enjoyed net inflows of $47.5 billion in the second quarter, meaning first half 2015 net inflows topped $76.3 billion. Of note, CTA funds had outflows of $4.8 billion during the second quarter. That said, given the robust performance in the first quarter, year-to-date flows remain positive to the tune of $6.4 billion of new capital added.
The multi-strategy fund sector saw the most funds with net inflows, as 49% brought in new capital during the second quarter of 2015 and only 32% saw a net outflow. That said, a mere 28% of relative value funds saw new investment in Q2 and 44% saw net outflows over the quarter. Niche strategies experienced the greatest outflows, especially asset-backed lending and insurance-linked strategies, with two-thirds of funds having outflows in the second quarter.
The Preqin data also highlights that larger hedge funds saw more net inflows relative smaller funds. Nearly 60% of funds already larger than $500 million in AUM saw additional net inflows.
Breakdown of hedge fund investors
The most recent survey of hedge fund managers by Preqin shows that 66% of hedge fund AUM today comes from institutional investors. Other data suggested that 92% of the total capital invested in hedge funds comes from the 570+ firms with $1 billion or more in AUM. Of note, almost 70% of the capital in the “$1 Billion Club” of the biggest funds originates from institutional investors. On the other hand, hedge funds with under $100 million in assets under management typically see their funding come from non-institutional sources. In fact, the Preqin data shows that only 28% of the capital in smaller funds originates from institutional investment.