Money continues to pour into hedge funds as investor interest remains strong

Investors poured another +USD12.47 billion into hedge funds in April, bringing year to date (YTD) inflows to +USD28.81 billion, according to the just-released April 2021 eVestment Hedge Fund Asset Flows Report. Overall hedge fund business AUM stood at USD3.525 trillion at the end of April, according to the new report.

“There were several strong underlying metrics behind the net inflow number in April,” says eVestment Global Head of Research and report author Peter Laurelli. “While net inflows alone would seem to be a positive sign, that is not always the case. In April, however, the data just looked good.”
 
Laurelli notes there was a high proportion of reporting managers with net inflows (57 per cent) and the proportion of managers who lost large amounts of AUM during the month – 2 per cent or 5 per cent of AUM – was relatively small at just 15 per cent and 7 per cent, respectively. Additionally, the overall volume of net asset movement was relatively low, just 1.9 per cent of AUM. “This means money wasn’t swirling around wildly during the month, but rather it was just a fairly steady allocation period,” he says.
 
Multi-Strategy hedge funds were big asset winners in April, pulling in +USD4.34 billion, bringing YTD inflows to +USD15.55 billion. April marked the sixth month in the last seven these funds have seen positive flow figures. The attention is on par with Multi-Strategy fund performance, which has been largely strong this year, but investors are still punishing Multi-Strategy funds that fail to perform. Looking at the small group of funds with meaningful outflows this year, their average return in 2020 was about -14 per cent. This 2021 AUM comeback is welcome as Mult-Strategy funds saw investors pull -USD2.37 billion from these funds in 2020 and -USD18.31 billion from these funds in 2019.
 
Whether it is some combination of concerns over inflation and equity valuations, or some other factors, investors resumed net allocations to Macro strategies in April, after quarter-end redemption pressure weighed on these products in March. Investors added +USD3.57 billion to Macro funds in April, bringing YTD flows to +USD3.15 billion. Like Multi-Strategy funds, Macro funds are making up lost ground from 2020 and 2019, when Macro funds saw investor redemptions of -USD14.10 billion and -USD20.60 billion respectively.
Directional Credit funds also pulled in just over USD3 billion in April, with investors adding +USD3.06 billion to these funds. In a similar theme, these funds were deeply in the red for investor flows in 2020 and 2019, with investor pulling -USD18.78 billion from these funds last year and -USD10.08 billion from them in 2019.

Event Driven funds saw muted inflows of just +USD770 million in April, bringing YTD flows into these funds to +USD1.99 billion. Event Driven funds are coming off a solid two years in inflows however, with these funds pulling in +USD3.94 billion in 2020 and +USD11.06 billion in 2019.

Among all hedge fund strategies eVestment tracks, the story looks most bleak for Long/Short Equity funds, with investors pulling -USD4.39 billion from these funds in April. This brings YTD investor redemptions for these funds to -USD8.81 billion. However, in this case the overall data hides the fact that a few Long/Short Equity funds account for most of this outflow, according to Laurelli. “With the exception of a handful of managers in 2021, the Long/Short Equity space is having a decent year,” he said. “If we were to remove this handful of managers from the picture, this segment would be showing net inflows for the year.”