After eight straight months of positive returns, hedge funds may have finally redeemed themselves in the eyes of investors.
During the second quarter, they put more money into hedge funds than they took out as allocations outweighed redemptions for the first time since the third quarter of 2015, according to a statement Thursday from industry tracker HFR. A net inflow of $6.7 billion in the second quarter offset the $5.5 billion redeemed in the first three months of the year, bringing net inflows for the first half of 2017 to $1.2 billion.
Total industry assets under management rose by $34.1 billion to $3.1 trillion, with positive returns boosting asset growth. The renewed interest in hedge funds comes in the midst of industry’s greatest period of performance since the financial crisis.
A Preqin report earlier this week said that hedge funds gained 4.87 percent over the first half of 2017 in their best start to a year since 2009.
Recent allocation trends reflect a forward-looking viewpoint, with investors focusing on quantitative and “trend-following” strategies that are not currently top performers, HFR President Kenneth Heinz said in the firm’s statement. These strategies led the quarter’s inflows, with investors committing $3.1 billion to systematic macro strategies.
Other popular investments included equity hedge funds, which brought in $3.8 billion, and relative value arbitrage strategies, which gained $1.6 billion in net new capital. Meanwhile, event-driven hedge funds suffered this quarter, with outflows of $3.8 billion.
“While the capital raising environment has improved, it remains challenging with low implied and realized volatility creating a performance-moderating headwind for managers,” Heinz said. “It is likely that funds which have and continue to navigate this low volatility environment, and which tactically position for surprise surges in volatility, will lead industry growth.”
