Hedge funds’ coffers swell further in February, as investors pile in

Cash on tap

Hedge funds have recorded their strongest two-month run of investor inflows since 2014, with multi-strategy managers attracting the strongest interest so far this year, according to new research by eVestment.

Allocators poured some USD16.44 billion into hedge fund strategies throughout February, which helped push total net inflows so far this year to USD23.74 billion. At the same time, strong positive performance for managers since the start of this year has brought hedge fund industry’s overall AUM to USD3.407 trillion.

Multi-strategy hedge funds have been the biggest draw for investors, attracting USD8.98 billion in the first two months of 2021, which included USD5.34 billion in February. Meanwhile, event driven managers pulled in USD2.47 billion of allocator capital in February, swelling this year’s new money to USD3.30 billion.

“Reported data indicated over 60 per cent of funds had net inflows in February, following about 50 per cent that saw new money in January,” eVestment’s global head of research Peter Laurelli said, pointing to a wide breadth of allocations across strategies. “This means the incoming assets are being relatively widely distributed.”

Elsewhere, investors added USD2.23 billion to long/short equity hedge funds last month, though on a year-to-date basis, flows to stockpicking strategies remain some USD1.47 billion in the red. Technology and healthcare-focused strategies have drawn the most interest in terms of sectors.

Laurelli said: “More than half the funds in [long/short equity] actually have seen net inflows YTD and removing a small handful of products which had a difficult stretch, overall net flows would be firmly positive.”

On the flipside, allocators yanked USD160 million from managed futures – the largest redemption last month – while distressed funds and equity market neutral managers also suffered investor withdrawals, albeit smaller, at under USD80 million.

Performance-wise, eVestment data shows hedge funds’ aggregated returns stood at 4.13 per cent year-to-date,  outflanking both the S&P 500 (up 1.72 per cent) and the MSCI World Ex-US-GD (which has risen 1.49 per cent) so far in 2021.

Looking ahead, eVestment sounded a note of caution in its update.

“While most is well, all is not well,” eVestment observed. “There have been some large redemptions clouding the otherwise positive sentiment for long/short equity managers, and inflows to macro managers feels more like a vote for future market uncertainty than for recent proof of being able to succeed in similar market environments.”