Gain of 3 percent in hedge fund index boosts total assets to $2.19 tn, Hedge Fund Research says
Global hedge fund assets rose to a record in the third quarter as solid gains in portfolios more than offset slow inflows of fresh investments, according to an analysis by Hedge Fund Research (HFR), the global hedge fund analysis and indexation firm.
Total hedge fund assets worldwide jumped by 3.6 percent in the third quarter to $2.19 tn, HFR says in a press release. The increase amounted to $80 bn in the quarter and $183 bn in the first nine months of 2012, mainly due to appreciation of holdings as investors were reluctant to commit new resources.
The HFRI Fund Weighted Composite Index gained 3 percent in the third quarter, adding almost $70 bn of the $80 bn increase in total assets in the quarter while net new capital allocations totaled $10.6 bn.
In the first nine months of the year, net inflows totaled $31 bn of the $183 bn capital increase. The low level of net investment places 2012 on track to be the slowest year for new investments since 2009, when investors withdrew a net $131 bn from hedge funds.
Hedge fund investors in the third quarter also tended to place new investment with the few most-established funds – those funds received the vast majority of capital and other funds experienced net outflows, HFR says.
‘Continuing the trend from prior quarters, investors exhibited a strong preference for established firms, with $13 bn of Q3 inflows concentrated in firms with more than $5 bn’ in assets under management, HFR says. ‘Through the first three quarters of the year, $43 bn of the $31 bn year-to-date inflows have been allocated to the industry’s largest firms.’
The most popular hedge fund investment strategy was relative value arbitrage, which drew $12.6 bn in new capital in the quarter and $35 bn in the first nine months of the year, bringing total capital invested to $586 bn, HFR says. The HFRI Relative Value Index gained 7.9 percent in the first three quarters of the year, leading all other investment strategies.
Equity hedge investment strategies, meanwhile, experienced net redemptions of $5.2 bn in the third quarter, even as the HFRI Equity Hedge Index rose 5.5 percent in the first nine months of 2012. Equity hedge investments are tied with relative value arbitrage investments for the most popular strategies as measured by assets, each with $586 bn.
Event-driven investment strategies saw net redemptions of $1.3 bn in the third quarter, even as the HFRI Event-Driven Index increased by 5 percent year-to-date. Total assets devoted to event-driven hedge fund investment strategies were $536 bn, notes HFR.
