Hedge Fund Capital Eclipses $2.51 Trillion Mark

The hedge fund industry witnessed a fifth consecutive quarterly record of capital inflows during 3Q13 eclipsing $2.51 trillion in fund capital.

Hedge Fund Capital Eclipses $2.51 Trillion Mark

Hedge Fund Research Inc’s recent report highlights that hedge fund assets posted a new milestone in third quarter, with the third quarter witnessing the highest inflows in over 2 years.

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As reported earlier, the hedge fund industry recorded a gain of $4.4 billion, bringing the total assets under management (AUM) to $1.91 trillion in September as global markets experienced momentum. During the month, hedge fund managers gained $3 billion, which provided positive impact to the industry’s total AUM.

Similarly, according to research firm Preqin, hedge funds posted a 3.24 percent gain during the third quarter despite negative performance in August.  The alternative asset research firm said that hedge funds’ performances in July and September were among the three best months this year. Hedge funds’ performance this year so far is in line with the previous year. Last year, hedge funds gained 7.37 percent through September, compared to 7.17 percent this year.

Equity Hedge saw maximum inflows

HFR Global Hedge Fund Industry Report published by HFR highlights the Equity Hedge strategies led the third quarter inflows with investors allocating over $10.6 billion to such funds. This marks the highest quarterly inflow for Equity Hedge strategy ever since financial crisis struck the global market.

Mirroring the strong inflow, the HFRI Equity Hedge Index posted 4 percent gain during the third quarter and over 9 percent YTD return through September. The enhanced performance was catalyzed by strong contribution from Technology / Healthcare and Fundamental Value Strategies, generating 17 percent and 12.9 percent returns respectively for the year-to-date.

Event Driven strategies attract $6.4 billion

With strong interest in Shareholder Activist and Distressed hedge funds, Event Driven strategies witnessed a $6.4 billion allocation from investors. Event Driven strategies witnessed over $16.4 billion of inflows for YTD 2013.

Within Event Driven strategies, activist strategies attracted $2.6 billion of new investor capital during the third quarter, while distressed strategies attracted $1.9 billion.

Justifying the strong inflow, activist strategies generated 11.9 percent return while Special Situations posted 11.2 percent return YTD.

Fixed Income- based Relative Value Arbitrage too witnessed strong inflows across the main strategy areas in 2013, with the third quarter witnessing $6.1 billion taking the YTD inflow to $20.5 billion.

Investors showed increasing preference to established firms with firms having over $5 billion AUM witnessing the largest capital inflows at $18.7 billion, while $3.6 billion was allocated to firms having less than $1 billion AUM.

Exuding confidence in the strong capital flows in hedge funds, Kenneth J. Heinz, President, HFR feels the hedge fund industry will witness record capital flows in 2014.