From Patturaja Murugaboopathy
(Reuters) – Global hedge funds are poised to post positive inflows in 2021 for the first time in three years, data from Preqin shows, thanks to strong returns and investors’ shift to alternative assets at a time of volatility and rising inflation.
Data from alternative assets data and analytics firm Preqin shows that hedge funds attracted inflows totaling $40.9 billion in the first three quarters of the year, after outflows of $97.2 billion and
(Graph: Quarterly inflows into hedge funds, https://fingfx.thomsonreuters.com/gfx/mkt/jnvweabzavw/Quarterly%20flows%20into%20hedge%20funds.jpg)
“Investors are looking to hedge funds to gain some level of diversification, especially given that the specter of inflation has recently entered the fray,” said Benjamin Crawford, vice president and head of research at BarclayHedge, a firm for alternative investment data.
“Several sectors of the hedge fund industry have a well-deserved reputation for protecting assets from inflation.”
(Graph: Total hedge fund assets under management, https://fingfx.thomsonreuters.com/gfx/mkt/akvezoxrnpr/Hedge%20funds%20total%20asset%20under%20management.jpg)
Analysts said inflows are likely to continue to rise over the next year due to heightened market volatility and uncertainty over the Omicron variant of COVID-19.
Data from Preqin showed that global hedge funds returned an average of 13.9% between January and November this year, marking the third straight year of returns above 10%. In comparison, the global stock index MSCI recorded a gain of 12.4% over the same period.
(Graph: Annual performance of hedge funds, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjqedeve/Yearly%20performance%20of%20hedge%20funds.jpg)
Event-driven strategies, which focus on corporate changes such as mergers and restructurings, led by 15.1%, while equity strategies returned 12.3%.
On the other hand, macro strategy funds returned just 7% in the first 11 months of 2021, compared to more than 14% in 2020.
(Graph: Hedge fund performance by strategy, https://fingfx.thomsonreuters.com/gfx/mkt/egpbkoqwwvq/Hedge%20funds%20performance%20by%20strategy.jpg)
“Global macro hedge funds have been challenged as some broad themes did not play out as planned earlier in the year, such as the steepening yield curve theme and US dollar weakness,” said Robert Christian, co-chief investment officer at K2 Advisors said.
According to eVestment data, between January and October this year, multi-strategy funds and managed futures funds were the top hedge fund recipients, raising $24.7 billion and $13.1 billion, respectively.
Long/short equity funds, on the other hand, saw the highest outflow of $12.6 billion this year.
(Chart: Fund inflows by hedge fund strategy, https://fingfx.thomsonreuters.com/gfx/mkt/xmvjonqxqpr/Fund%20inflows%20by%20hedge%20fund%20strategies.jpg)
Broken down by region, US hedge funds raised $44.3 billion this year, while European and Asian funds raised $2.95 billion and $2.34 billion, respectively.
On the other hand, emerging market funds saw outflows totaling $4.86 billion, the data showed.
“Apparently everyone finds a reason to invest their wealth in hedge funds, whether they think the present moment heralds the end or the coming of a happy age, or have absolutely no idea what lies ahead, but don’t want to get caught guard either way,” said BarclayHedge’s Crawford.
(Additional reporting by Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Alexander Smith)
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