Hedge fund assets soar to record volumes as yield-hungry investors swell industry coffers

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Global hedge fund industry assets are surging to record levels.

New data published by BarclayHedge shows total industry assets have now mushroomed to USD4.4 trillion, with hedge funds raking in USD18.3 billion of new inflows from allocators during July, as managers scored a USD7.3 billion trading profit for the month.

Hedge funds have now recorded a fifth consecutive month of positive investor flows, after allocators poured in USD16.6 billion in June, USD36 billion in May, USD23.3 billion in April and USD19.1 billion in March, according to the Barclay Fund Flow Indicator.

In the 12-month period to the end of July, hedge funds attracted USD156.6 billion in inflows. A USD407.4 billion trading profit over the period brought total industry assets to USD4.4 trillion as July ended, up on USD4.32 trillion at the end of June, and outweighing the USD3.26 trillion recorded in July 2020.

With equities and bonds showing greater correlation in recent months, yield-hungry allocators are understood to be turning to hedge funds and other alternative investments to help boost portfolio returns amid the shifting economic backdrop.

Ben Crawford, head of research at BarclayHedge, said investors have been in a “risk-on” mode for most of the last 12 months, and July’s metrics again underlined that prevailing sentiment.

“There was no shortage of promising auguries in July,” Crawford said. “Strong economic signals from the US, China and Europe, surging equity markets, increasing business activity and plummeting jobless figures all contributed to investors’ enthusiasm for hedge fund opportunities.”

Sector-specific hedge funds – such as those strategies trading healthcare and technology – attracted the most investor interest, drawing in USD4.7 billion, or 1.4 per cent, of assets in July.

Balanced (stocks and bonds) funds added USD3.3 billion of new capital, or 0.5 per cent of assets, in July, with fixed income strategies bringing in USD2.4 billion of allocator money and multi-strategy managers drawing USD2.3 billion.

On the flipside, investor yanked some USD1 billion out of equity long-bias funds, and withdrew USD581.1 million from equity market neutral strategies and USD246 million from event driven managers.

At the same time, managed futures, CTAs and trend-following strategies rebounded back into positive inflow territory in July, with investors pouring in USD920.9 million to the sector. 

Systematic CTAs attracted the lion’s share, BarclayHedge said, pulling in USD748.1 million, as multi-advisor futures funds gained USD166.9 million of new money. Discretionary CTAs took in USD87.6 million, and hybrid CTAs saw USD85.2 million.

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Hugh Leask
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