Hedge Fund Flows Remain Positive — Evening Brief – 06.28.24
Investors are pouring more money into the hedge fund sector than they are withdrawing this year, with May’s net inflows remaining strong, as manager performance rebounded into positive territory, according to Citco.
As hedge funds gained 1.7% in May, erasing April’s 0.7% loss, investors added an additional $3.2 billion to the industry, with $11.1 billion in total subscriptions outweighing $7.9 billion in redemptions.
Long/short equity and multi-strategy hedge funds attracted the most capital on top of positive monthly returns, whereas event-driven strategies saw net capital withdrawals as investment performance slowed. With the industry attracting $5.7 billion in April, net investor inflows into hedge funds have now totaled $7.9 billion year to date.
Hedge funds have increased their average performance by 8.26% since the beginning of 2024, according to the global alternative investment asset servicer, which manages over $1.8 trillion.
In terms of flows, hybrid hedge funds were the outstanding strategy in May, with investors adding an additional $1 billion on a net basis, marking the fourth consecutive month of positive flows. Allocators have invested $5.9 billion net to hybrids so far this year, making it the most popular hedge fund strategy in 2024. Last month, fund of funds raised $700 million in net new capital.
Equity hedge funds saw a 1.8% increase in net inflows, totaling $600 million. Arbitrage funds and multi-strategy managers both gained 2.7% and 1.4%, respectively, in May, with net allocations of $500 million.
On the negative side, event-driven strategies had outflows in May, with allocators withdrawing $100 million net from the sub-sector for the second consecutive month, resulting in a 1.2% monthly loss.
“Projections show a spike in redemptions in the final month of the quarter, but these numbers are subject to change,” Citco observed in its latest Monthly Hedge Fund Update.
In terms of size, all asset under administration (AUA) categories concluded the month with favorable results, with the largest hedge funds outperforming smaller firms.
The largest funds, with more than $3 billion in AUA, produced a weighted average return of 2.1%, followed by the $1 to $3 billion group, at 1.3%. Last month, funds with AUAs of $200 to $500 million gained 1%, followed by funds with AUAs of $500 million to $1 billion and those with AUAs of less than $200 million, which gained 0.2% and 0.1%, respectively.
Overall, more than two-thirds (67%) of Citco-tracked hedge funds produced a positive return in May, up from 48% in April.