Evening Brief – 03.28.24
Hedge Funds Shine
Investors are pouring more capital into hedge funds this year as managers continue to provide strong returns for clients, according to new Citco data, which show net inflows exceed $3 billion since the beginning of the year.
Analysis conducted by the global hedge fund and alternatives asset servicer, which oversees $1.9 trillion in assets under administration, revealed that nearly 75% of all hedge funds produced positive returns during the month of February.
This marks a significant increase from the previous month’s 64%. Overall, hedge fund managers achieved a 2% weighted average increase in performance last month, resulting in a cumulative gain of approximately 3.5% year-to-date.
Allocations to the industry continue to rise, with investor subscriptions exceeding $8.9 billion in February, outweighing redemptions of $7.1 billion for a total net inflow of $1.8 billion. According to Citco’s data, hedge funds’ holdings have increased by $3.2 billion year-to-date.
Multi-strategy hedge funds, which increased their investment performance by 1.8% in February, saw the highest allocator activity, with $1.7 billion in net inflows. Hybrid strategies saw a net rise of $300 million, followed by fund of funds at $200 million, and global macro and arbitrage strategies saw net inflows of $100 million each.
Despite equity hedge funds rising 3.4%, investors continue to pull back, with stock pickers experiencing the largest net outflows last month at $400 million, down from $700 million in January.
In addition, allocators pulled $300 million from event-driven hedge funds and $100 million from emerging market strategies.
European hedge funds continue to receive the greatest net inflows, with net allocations increasing to $1.8 billion from $1.2 billion in February. Meanwhile, net flows to Americas-based hedge funds fell marginally, with investors withdrawing $100 million. In Asia, hedge funds attracted $100 million in net new subscriptions after receiving $200 million in net redemptions the previous month.
Despite recent inflows, Citco forecasts a net outflow of capital from the hedge fund industry of approximately $11.1 billion in the first quarter.