The hedge fund industry posted estimated inflows of USD7.6 billion, or 0.5% of assets, in March 2010 and assets now stand at a 16-month high of USD1.64 trillion, according to the latest figures released by TrimTabs Investment Research and BarclayHedge.
“The Barclay Hedge Fund index is up 29.9% in the past 13 months,” says Sol Waksman (pictured), CEO of BarclayHedge. “Hedge funds returned an average 2.9% in March, the best performance since September 2009.”
Multi Strategy funds posted the largest outflow (1.3% of assets) in March, while Event Driven funds posted the biggest inflow (1.5% of assets). Event Driven funds show a year-to-date return of 4.7%, one of the largest of all fund strategies.
“We’ve seen a stark shift to the riskiest strategies from the most conservative ones,” says Vincent Deluard, Global Equity Strategist at TrimTabs. “Aggressive bets have paid handsomely and flows are following performance.”
In the May Hedge Fund Flow Report, TrimTabs found that a strong historical relationship between hedge fund flows and returns weakened dramatically since the credit crisis in 2008. The firm believes stricter leverage requirements and proposed industry regulation are depressing inflows. TrimTabs analysis also shows that the volatility of hedge fund returns fell sharply in the past year.
“We fear that systemic risk is greater than most market participants realize,” Deluard adds. “As recent market action highlights, small shifts can quickly lead to disproportionate losses when everybody’s betting the same way.”