eVestment: Hedge Fund Assets Rise $10.52B In May; Total Industry AUM Now $3.13T

Jun 22 2017 | 6:23pm ET

Investors added an estimated $10.52 billion to hedge funds during May, bringing year-to-date flows to $23.32 billion and pushing total industry AUM $3.130 trillion, according to new research from eVestment.

The company’s findings, contained in its Hedge Fund Industry Asset Flows Report for May, are the latest in a series of indicators suggesting the hedge fund sector is showing signs of life. While hedge fund flows have not turned into a torrent, they are sufficiently positive this year to suggest 2016’s significant redemptions were more of a reaction to difficult performance comparisons than a wholesale souring on the alternative investment segment itself. 

Key highlights from eVestment’s report:

  • Macro strategies again received net inflows in May, the fifth consecutive month of new capital. The segment is leading the industry for flows in 2017, but it is also lagging the industry in terms of performance, which may dampen enthusiasm.
After the last two months of negative returns, the ten largest reporting funds are underperforming most other segments of the industry. 
  • Investor sentiment has turned negative for managed futures funds.
 It has been an up-and-down ride for managed futures investors performance-wise, and for managed futures funds flows-wise, so far this year. But as performance continues to lag the industry, investors pulled money from the segment in May.
  • Multi-strategy fund flows rebounded in May after being under pressure since mid-2016 on poor return comparisons and non-performance related issues facing one of its largest constituents. However, the segment has booked only two negative months in the last fifteen, and six up months in a row through May has helped settle nerves. 
  • Commodity strategies are the worst performing segment of the industry in 2017, yet investors surprisingly resumed allocating to commodity funds in May. 
  • Active credit exposure is attractive again.. Since mid-2016, returns have stabilized and performance has generally been good, so investors have warmed to the segment. May’s elevated inflows are the second consecutive month, and fourth in the last five, where allocations have outpaced redemptions. 
  • Emerging market hedge fund flows were near flat in May, and are negative for 2017 despite five consecutive months of EM outperformance. Larger funds that performed very well in the second half of 2016 have continued to draw assets, but those targeted allocations are being offset by redemptions from others. 

Past returns continue to be a driver of 2017 allocations, eVestment writes in the research note, further observing that in cases where returns have been mediocre, size has been the differentiator. 

Furthermore, products which produced firmly positive returns in the prior year appear to have had little trouble raising capital, the company added, while those with losses have had difficulty keeping it. 

“So far this year, investors have added an estimated $46.3 billion into funds that returned greater than 5% in 2016, while removing $30.4 billion from those who lost money last year,” writes Peter Laurelli, global head of research for eVestment, in the report. “Meanwhile, among funds returning 0-5%, larger ones have gained $5.2 billion in net new assets while smaller ones have seen redemptions of $2.4 billion.” 

The lone exception to this observation is managed futures funds, to which net new capital has flowed this year regardless of segment or size, the report continued. 

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

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...