Hedge fund inflows at highest in third quarter since 2018

Hedge funds added US$13 billion of assets between the start of July and end of September, the first time the industry has generated net inflows in any quarter since 2018, data from industry tracker Hedge Fund Research (HFR) showed.

Total assets managed by the hedge fund industry rose to US$3.31 trillion at end of September, with macro strategies receiving US$7.2 billion and trend-following strategies gaining US$3.2 billion, the data showed.

The HFRI 500 Fund Weighted Composite Index gained 3.6 per cent in the third quarter, bringing yearto-date performance to 0.8 per cent. The S&P 500 would have made gains of 5.57 per cent over the same period.

In a news release, Kenneth J. Heinz, HFR's president, attributed the hedge fund industry's positive net inflows to investors who “allocated new capital to hedge funds in the third quarter as a result of both defensive outperformance through coronavirus-driven volatility in early 2020 as well as (from) opportunistic gains through the uneven financial market recovery in the second and third quarters.”

“Institutions globally are making forward-looking allocations to hedge funds, anticipating and positioning for the near-term uncertainties of both the virus and the U.S. election, as well as intermediate-term macroeconomic uncertainties of the U.S., European and Asian economies into 2021,” Heinz said.

The hedge fund industry has come in for criticism for high fees and returns that have not matched those achieved by index trackers.

Hedge funds made 10.45 per cent on average in 2019 compared to the S&P index tracker, which would have made 31.45 per cent, the data showed. Worldwide aggregate hedge fund assets rose 4.1 per cent to US$3.31 trillion in the quarter.