Reflecting their continuing appetite for hedge funds, investors allocated $18.3 billion to the vehicles in March, pushing net flows to $55.1 billion, a level last surpassed in the second quarter of 2007.
This finding comes from eVestment in its March and first quarter report on Hedge Fund Asset Flows. The research indicates that hedge fund assets under management reached $2.931 trillion at the end of the first quarter, nearly equaling the $2.938 trillion high attained in the second quarter of 2008.
“Investors’ appetite for equity focused hedge funds has been the primary driver of inflows in 2014, a trend persisting since June 2013,” the report states. “Flows into equity strategies in Q1 2014 were the highest since Q2 2007.
“The rate spike in May 2013 has proven to be the inflection point when investor interest shifted from credit to equity hedge funds,” the report adds. “In the two years leading up to that point, investors allocated $80.7 billion into credit strategies while redeeming $70.6 billion from equity funds. In the nine months since, equity inflows have been more than double those into credit strategies and total AUM in equity strategies surpassed credit funds in Q1 2014 for the first time in 18 months.”
Among the survey’s additional findings:
- Credit fund flows totaled $9.6 billion in the first quarter of 2014;
- Event-driven funds received the largest allocations in March and were second in terms of investor interest in Q1 2014, behind long/short equity. Inflows into activist strategies exceeded $6 billion in new capital in the first quarter;
- During the year past, investors pulled $13 billion from macro strategies, which continue to suffer from underperformance;
- At the end of the first quarter of 2013, assets under management of managed futures dipped to its lowest level since mid-2004; and
- Investor sentiment toward emerging markets exposure has “cooled” following investment losses in China and “tensions” in Europe connected with the crisis in Ukraine. Emerging market flows increased during the quarter.