After a rough 2016, interest in hedge funds seems to be returning as investors allocated $15.7 billion in new money to hedge funds in March, according to the just-released eVestment March 2017 Hedge Fund Asset Flows Report. March inflows were the industry’s largest positive numbers in 20 months and total industry AUM now stands at $3.107 trillion.
The renewed interest appears to be driven by investors’ acknowledgement of strong hedge fund performance in late 2016 and so far this year, coupled with a desire to hedge against future market turbulence given uncertainty in several geo-political and business arenas.
The new data also shows the beginning of a potential consolidation trend in the industry, with 52% of funds gaining assets while 48% lost assets. Additionally, there was a greater proportion of all products, and large funds, losing 2% and 5% of AUM due to outflows than gaining the same amount from inflows. When these metrics are combined with strong overall net industry inflows, it is a strong sign of consolidation of assets among a smaller number of products.
Some key points from the new report include:
- Macro hedge funds, up $7.22 billion in March, had their largest monthly inflow since January 2010 in March. For Q1, Macro funds are up $11.46 billion. Investors are showing clear demand for strategies which focus on thematic approaches to major public and derivative markets.
- Managed futures also were big winners in March, with assets up $7.06 billion for the month and $6.47 billion for the quarter. This is further evidence that institutional investors are using the segment of the industry in hopes of benefiting from systematic approaches that have worked well in past periods of market turbulence.
- After several months of redemption pressures on the European hedge fund industry, inflows finally outpaced outflows in March. The net inflow of $2.98 billion was not enough to turn full Q1 flows for the region positive, but they are a good sign that some of the major redemptions pressures facing the segment have abated.
- Asia-focused funds and funds domiciled in Asia were among the big losers in March. Asia-focused funds saw assets fall by $1.75 billion in March, and now down by $2.67 billion for Q1, while Asia-domiciled funds saw assets fall by $0.81 billion, almost wiping out positive AUM growth for the quarter.
Please click here to download a full copy of the report.
It’s too soon to say if this recent inflow is a one-time blip or the beginning of a trend. But after 2016, event this small amount of investor interest is a good sign for the hedge fund industry.