Amy Bensted, Preqin
The hedge fund industry saw net inflows totalling $19.7bn in Q1 2017, ending five successive quarters of net outflows for the industry. 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% in the first quarter of the year to hit a record $3.35tn. All leading hedge fund strategies experienced a percentage increase in total assets and, notably, macro strategies funds attracted $11.1bn of net inflows to expand beyond $1tn in AUM ($1,011bn) for the first time.
Key Q1 2017 Hedge Fund Asset Flow Facts:
- Macro strategies funds and event driven strategies funds attracted the largest amount of new capital during the quarter, recording net inflows of $11.1bn and $8.9bn respectively.
- With inflows of $1.1bn, the total assets held by niche strategies grew 10% to $16bn , the largest percentage increase of any strategy.
- Nearly half of all outflows (46%) in 2016 were from equity strategies, and that trend continued in Q1 2017 as the strategy experienced $10.0bn of investor redemptions .
- CTAs continue to attract new investor capital with inflows of $7.2bn in Q1 2017 and, after inflows of $25.5bn in 2016, now hold $256bn in assets. North America-based hedge fund managers attracted the greatest amount of capital over Q1 2017 with net inflows of $19.9bn; Europe was the only region to lose assets over Q1 with net outflows of $8.5bn .
- Fifty-three percent of hedge funds that achieved a return of 5.00% or more during 2016 received investor inflows in Q1 2017, and 56% of funds that achieved an annualised three-year return of more than 5% saw inflows . In contrast, only a fifth of vehicles that generated three-year returns of -5.00% years attracted inflows.
- All fund sizes were able to attract new capital in Q1 2017; 53% of funds between $500mn and $999mn saw inflows while smaller funds were also successful: 47% of funds with less than $100mn saw inflows with just 36% losing assets.
Amy Bensted, Head of Hedge Fund Products said: "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% - investor sentiment seems to be improving in 2017, which is reflected by inflows over the start of the year."