The hedge fund industry saw net inflows totalling USD19.7 billion in Q1 2017, ending five successive quarters of net outflows for the industry, according to the latest Hedge Fund Asset Flows reports from Preqin.
The influx of investor capital, combined with a consistent run of positive performance for the industry, has seen total assets held by hedge funds grow by 3.2 per cent in the first quarter of the year to hit a record USD3.35 trillion.
All leading hedge fund strategies experienced a percentage increase in total assets and, notably, macro strategies funds attracted USD11.1 billion of net inflows to expand beyond USD1tn in AUM (USD1,011 billion) for the first time.
Macro strategies funds and event driven strategies funds attracted the largest amount of new capital during the quarter, recording net inflows of USD11.1 billion and USD8.9 billion respectively.
With inflows of USD1.1 billion, the total assets held by niche strategies grew 10 per cent to USD16 billion, the largest percentage increase of any strategy.
Nearly half of all outflows (46 per cent) in 2016 were from equity strategies, and that trend continued in Q1 2017 as the strategy experienced USD10.0 billion of investor redemptions.
CTAs continue to attract new investor capital with inflows of USD7.2 billion in Q1 2017 and, after inflows of USD25.5 billion in 2016, now hold USD256 billion in assets.
North America-based hedge fund managers attracted the greatest amount of capital over Q1 2017 with net inflows of USD19.9 billion; Europe was the only region to lose assets over Q1 with net outflows of USD8.5 billion.
Fifty-three per cent of hedge funds that achieved a return of 5.00 per cent or more during 2016 received investor inflows in Q1 2017, and 56 per cent of funds that achieved an annualised three-year return of more than 5 per cent saw inflows. In contrast, only a fifth of vehicles that generated three-year returns of -5.00 per cent years attracted inflows.
All fund sizes were able to attract new capital in Q1 2017; 53 per cent of funds between USD500 million and USD999 million saw inflows while smaller funds were also successful: 47 per cent of funds with less than USD100 million saw inflows with just 36 per cent losing assets.
Amy Bensted (pictured), head of hedge fund products at Preqin, says: “Five successive quarters of net outflows have been reversed in Q1 2017, as the industry recorded the largest quarterly influx of capital since Q2 2015. Along with the continued run of positive returns being made by most leading strategies, this has helped propel the industry to a record size.
“2016 was undeniably a difficult year for the hedge fund industry, with net outflows reflecting a reduced appetite for the asset class from institutions following a sustained period of low returns to investors since 2014. However, following an extended run of improved performance since March 2016 – the 12-month return of hedge funds is 10.67 per cent – investor sentiment seems to be improving in 2017, which is reflected by inflows over the start of the year.”
