Evening Brief – 03.05.24
A Solid Start
Investors added $11 billion in new capital to hedge funds in January, which outweighed $9.4 billion of redemptions, giving net inflows of $1.6 billion and extending the momentum witnessed late in the third quarter, according to new Citco data.
The global hedge fund and alternative asset servicer, which has $1.8 trillion in assets under administration, also said that Treasury payments reached a record high of 49,548 in January, 30% higher than the same month last year.
Funds of funds topped allocator appetite, with $1.3 billion in inflows, while those strategies reported $1.3 billion in subscriptions and $0.3 billion in redemptions.
Meanwhile, arbitrage hedge fund strategies received $700 million in net inflows, followed by multi-strategy at $500 million and global macro at $200 million. On the other hand, stock picking strategies experienced the largest net outflows last month, totaling almost $700 million, as investors withdrew $3.6 billion from equity-focused funds while adding $2.9 billion. Hedge funds in emerging markets experienced subdued outflows of approximately $100 million.
Geographically, hedge funds in Europe saw the most net inflows, reaching $1.2 billion, while managers in the Americas received approximately $600 million. In contrast, investors withdrew $200 million from Asia-based strategies last month.
The increase in flows comes as hedge funds have had a successful start to 2024, with equity-focused hedge funds producing 1.8% positive returns amid the ongoing stock market boom, closely followed by global macro strategies, which increased 1.6%.
Last month, multi-strategy managers (1.2%), fixed income arbitrage (1.1%), and commodities-focused hedge funds (0.8%) all posted positive returns. On a negative note, event-driven hedge funds fell 2.3%.
Despite the overall increase, the number of hedge funds providing positive returns fell dramatically month on month, from more than 79% in December to 64% in January, Citco reported. The largest managers, with more than $3 billion in assets under management, led the way, gaining an average of 1.8%, followed by funds between $1 billion and $3 billion, which gained 1.5%.
Mid-sized managers with $500 million to $1 billion and $200 million to $500 million were marginally positive at 0.3% and 0.2%, respectively, while the smallest funds with less than $200 million were the only group that slipped into negative territory, falling by roughly 0.1%.
Treasury payments from hedge funds also set new highs for January, departing from the traditional decline in the first month of the year. The 49,548 payments are the second highest monthly total ever, and just below December’s record of 50,732.