In a globally volatile investment market, performance gains in the hedge fund industry helped push assets in the space to USD3.086 trillion in October, according to the latest eVestment Hedge Fund Asset Flows Report.
While many question the value of hedge funds, performance gains during a turbulent period can highlight their value as part of a balanced investment portfolio.
Not all segments benefitted equally, however.
Total hedge fund assets increased 1.56 per cent in October 2015, the industry’s largest monthly increase since September. Performance gains accounted for the majority of the asset increase. Investors added an estimated USD4.58 billion in October, bringing the industry’s total assets under management to USD3.086 trillion. For the year, investors have added an estimated USD75.45 billion into the industry.
Multi-strategy funds saw inflows of USD2.40 billion during the month, which brought YTD allocations up to USD52.4 billion.
Investor interest in equity exposure was net positive in October. Investors added an estimated USD1.38 billion to the segment, with directional/fundamental equity being the primary beneficiary.
Event driven strategies saw outflows of USD1.02 billion in October, bringing YTD flows to negative USD7.10 billion, after having received an estimated USD42.47 billion from investors in 2014.
Credit related strategies were the primary source of negative investor sentiment in October. The universe of credit funds had produced a string of losses from June to September 2015, along with another negative six-month period ending January 2015. Investors have been reacting by pulling money from the space in four of the last five months resulting in USD15.58 billion being removed.
Flows for macro funds were positive in October, at USD2.03 billion, but it was not enough offset redemptions in September of USD3.61 billion. Despite the net asset gain in October, notable redemptions did occur as investors continue to react to the universe’s recent patches of elevated performance declines.
Emerging market fund flows were negative for the fourth consecutive month in September with USD1.23 billion of redemptions during the month. The string of outflows is being mirrored in the traditional, long-only segment of the industry indicating investor sentiment toward emerging markets exposure is overwhelmingly negative.
China-focused funds experienced net redemptions for the second consecutive month in October, with products reporting to eVestment losing an estimated USD1.37 billion. The outflow is no doubt a reaction to recent volatility, despite performance being overwhelmingly positive within the universe and rising again in October.
Funds domiciled in Europe saw elevated interest from investors in October. Allocations went to the largest products and were distributed across primarily equity focused funds, with some of the largest managed futures firms also taking in new assets.
