Investors Hungry for Hedge Fund Returns — Evening Brief – 05.23.24
Capital flows into hedge fund strategies reached their highest level this year in April, despite a down month performance-wise for the industry.
While hedge funds experienced their first down month of 2024, the industry saw net inflows of $5.7 billion, with new subscriptions of $11.8 billion outweighing redemptions of $6.2 billion last month.
As a result, allocations have turned positive in 2024, with net inflows totaling $2.6 billion year to date, according to the global alternative investment asset servicer, which manages more than $1.8 trillion.
Almost all strategy types saw positive net flows, with multi-strategy funds leading the way with net inflows of $2 billion in April, as $5.2 billion in allocations outpaced $3.3 billion in redemptions.
Meanwhile, allocators put an additional $1.1 billion into fund of funds on a net basis, followed by hybrid funds at $900 million, as the favorable trend from the first quarter carried over into April. Equity hedge funds and global macro strategies received net inflows of $800 million and $400 million, respectively, followed by arbitrage and emerging markets funds with $300 million and $200 million.
Geographically, funds in the Americas had the highest inflows at $4.2 billion, followed by Europe at $900 million and Asia at $600 million.
On an assets under administration (AUA) basis, the largest funds with more than $10 billion in AUA led the way with net inflows of $2.2 billion, followed by firms with $5 billion to $10 billion, which also experienced net inflows of $2.2 billion. Funds with $1 billion to $5 billion experienced net inflows of $1.1 billion, while funds with less than $1 billion saw net inflows of $200 million.
Citco reported that hedge funds lost 0.7% on average in April, a steep decrease from March’s 2.2% average gain, with the majority of sub-strategies ending the month in negative territory.
Event-driven hedge funds recorded the most significant monthly loss, falling 2.1%, while long/short equities strategies fell 1.3% and global macro returned 1%. Multi-strategy hedge funds and fixed income arbitrage strategies decreased 0.3%.
Citco said that only commodities-focused funds saw positive returns in April, rising 2.1%.
The largest hedge funds with more than $3 billion in assets experienced a 1% performance drop in April after being the best performers year-to-date. While most other size categories had losses of less than 1%, managers with $500 million to $1 billion in assets defied the trend, rising 0.1% last month.
Despite April’s losses, hedge funds are still up year to date, with an industry-wide gain of 6.5%.