Macro, Event-Driven Hedge Funds Attract Most Money Despite Lagging Performance

Investors showed optimism even as the strategies trailed in performance during the first quarter.


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 HFR’s 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 point.”

It’s 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. HFR’s Equity Hedge Index returned 3.62 percent during the quarter, the highest of its four indexes, which also includes relative value.

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, Preqin’s head of hedge fund products, said in a May 16 statement on the firm’s hedge-fund asset flows report for the first quarter.