Increasingly complex global environment prompting investors to turn to hedge funds, HFR says
Total capital invested in hedge funds rose to a record high in the third quarter as new investment came in at the fastest pace in more than two years, according to industry analysis and consulting firm Hedge Fund Research (HFR).
Total investment in hedge funds grew to $2.51 tn in the third quarter from $2.42 tn in the previous quarter, setting the fifth straight quarterly record for total capital invested, HFR says. Net new investment inflows rose to $23 bn, the highest since the second quarter of 2011.
The few largest hedge funds received the greatest share of new investment, with $18.7 bn in new net capital inflows going to funds with more than $5 bn in assets under management (AUM). According to HFR, funds with AUM of between $1 bn and $5 bn received a combined $1.1 bn of net new investment and smaller funds received a total of $3.6 bn.
Kenneth Heinz, president of HFR, predicts investment in hedge funds will continue its surge into 2014 as rapid change in global politics and macroeconomics prompts investors to seek out the increasingly complex investment strategies carried out by hedge funds and other large market players.
‘Hedge fund capital flows in Q3 2013 were consistent with trends and themes observed throughout the broader asset management industry, as investors increased allocations to innovative and sophisticated strategies,’ Heinz says. ‘From the US government shutdown and the tapering of quantitative easing to Abenomics in Japan, unrest in Syria and the impact of recent European elections, the requirement for investors and fund managers to understand geopolitical and macroeconomic influences has never been higher – or more relevant.’
In September the HFRI Fund Weighted Composite Index, the broadest measure of hedge fund performance for the month, rose 1.5 percent, bringing gains in the first nine months of the year to 5.5 percent. HFR’s Latin America index led the increase in terms of percentage gains, rising 4.2 percent, followed by the Russia/Eastern Europe Index, which climbed 3.4 percent and the Energy/Basic Materials Index, which rose 3.3 percent.
