eVestment: $7.9B In Hedge Fund Industry Inflows In February

Mar 23 2017 | 9:23pm ET

After a long string of redemptions, hedge funds netted an estimated $7.9 billion in inflows in February and are now positive year-to date in 2017, according to new data from eVestment.

Hedge funds endured five consecutive months of net outflows leading up to February’s gains, as well as in seven months out of the last eight, making last month’s net inflows especially welcome. 

Total industry AUM now sits at $3.085 trillion, eVestment said, the highest level since July 2015. The fund flows information is compiled in the company’s February 2017 Hedge Fund Asset Flows Report.

Other highlights:

  • Macro strategies in demand. After a disappointing year for flows in 2016, driven primarily by erratic 2015 returns and losses from notable products, investors appear to have noticed the benefit many macro managers were able to provide investors in 2016. In eVestment’s February performance report, we noted that the ten largest macro funds significantly outperformed their peers in 2016.
  • Quants driving long/short equity fund flows.  Long/short equity hedge fund flows have been negative in 2017, but much of February’s inflows and a large proportion of those with inflows this year, have been funds operating quantitative strategies. Without quant equity, long/short equity flows in February would have been negative, and YTD the group has accounted for about 35% of reported net inflows.
  • Despite a difficult 2016, investors have not completely turned their backs on managed futures strategies.
Well on their way to earning the unfortunate title of “most loved, least productive” strategy in 2016, investors began to redeem from managed futures products at the beginning of Q4 2016. Redemption pressures continued into January, however February showed a meaningful reversal.
  • Event driven funds seeing some positive signs after two very difficult years.
Though inflows in February were essentially flat, and YTD flows remain negative, event driven fund flows are showing flickers of life. Just over two-thirds of event driven funds reported net inflows in February, and more than half have seen positive flows in 2017. This is a signal that while redemption pressures still exist, they appear targeted rather than widespread. 
  • Credit and multi-strategy funds attracting new assets. Two groups which have struggled to attract consistent positive flows since 2015 appear to be gaining favor of late, suggesting a renewed investor confidence in these opportunities.
  • Investors are showing mixed signals toward regional EM strategies. The regional investment preferences for products receiving the bulk of inflows vs. the bulk of outflows in both February, and YTD 2017 are very similar. If anything, there is a slightly higher prevalence of interest in Russia for inflows vs. outflows, though there are absolutely Russia-focused funds exhibiting both.
  • Fund strategy appears to be more influential than regional bias in flows.
Macro and credit funds focusing on emerging markets are receiving more consistent investor interest compared to equity-focused strategies. China fund flows were slightly positive, however there was a large divide in flows between credit (positive) and equity-focused (negative) strategies. 

“Quite often in 2016, it was difficult to find something positive about which to comment on the state of investor sentiment toward the hedge fund industry,” observed eVestment’s global head of research Peter Laurelli in the report. 

“Looking through February’s data, the feeling is the opposite,” he added. “While it is apparent 2017 may not resemble the large inflow years between 2009 and 2016, there is an overwhelming sense of positive undertones to the data.” 

Atlanta-based eVestment was founded in 2000 by Jim Minnick, Matt Crisp and Heath Wilson. The company boasts one of the most comprehensive global databases of traditional and alternative strategies and provides institutional investment data intelligence and analytic solutions to clients worldwide.

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