Investors increased their bets on hedge funds with macro and
event-driven strategies during the first quarter, even as the
investment strategies lagged in performance this year.
Hedge funds focused on the two strategies attracted the
largest amount of new capital in the first quarter, with macro
funds gaining $11.1 billion of net inflows and event-driven
strategies $8.9 billion, according to a report from alternative assets research
firm Preqin. During the same period, the two investment
strategies had the lowest returns among the indexes tracked by
Hedge Fund Research: the Macro Index had losses of 0.15
percent, while the Event-Driven Index was up 2.23 percent.
Dulari Pancholi, a senior research
consultant at investment consulting firm NEPC, said many of her
clients have benefited from a macro approach to diversify their
portfolios. While macro-funds' return of 1.04 percent last year
was the lowest among HFRs indexes, Pancholi points out
that some individual managers have been able to outperform the
pack with the right approach.
If you picked the right managers, you benefited a
lot, she said. Depending on which managers you went
with, it was clearly a manager selection aspect at that
Its easier to see why event-driven hedge-funds may be
attracting investors as they posted a 10.57 percent gain last
year, the highest of the indexes tracked by HFR. Also, some
investors may be choosing the strategy in preparation for the
next distressed-debt cycle, Pancholi said.
Preqin reported that equities had the largest outflows among
the various hedge-fund strategies in the first quarter, losing
$10 billion in assets, an indication that investors may be
hedging against the persisting bull market. HFRs Equity
Hedge Index returned 3.62 percent during the quarter, the
highest of its four indexes, which also includes relative
Meanwhile, in a reversal from the past five straight
quarters, the hedge-fund industry saw net inflows of nearly $20
billion during the first three months of the year, according to
Preqin. The increase in capital has driven total hedge-fund
assets to a record $3.35 trillion.
Investor sentiment seems to be improving in 2017,
which is reflected by inflows over the start of the year,
Amy Bensted, Preqins head of hedge fund products, said in
a May 16 statement on the firms hedge-fund asset flows
report for the first quarter.