Hedge fund assets top $2 trillion, reach all-time high

Hedge fund industry assets hit an all-time high of $2.02 trillion on March 31, according to new net flow data from Hedge Fund Research.

The previous high was $1.93 trillion in the second quarter of 2008, prior to the financial crisis.

Assets invested in hedge funds and funds of funds rose a combined $102 billion in the first quarter. Net inflows into single and multistrategy hedge funds totaled $27.7 billion, and hedge funds of funds attracted $4.8 billion of net inflows, HFR analysts reported Tuesday. The quarterly inflows were the largest since the third quarter of 2007.

“The growth of the industry to surpass significant threshold levels of both investor capital and fund performance validates that the hedge fund industry has completed its recovery from the financial crisis,” Kenneth J. Heinz, HFR president, said in the firm’s latest inflow and performance report.

Part of the growth of the hedge fund industry in the first quarter was the result of good investment returns, Mr. Heinz said in the report.

Returns of major hedge fund indexes were universally positive in the quarter ended March 31, led by 2.35% for the Hennessee Hedge Fund index. The Dow Jones Credit Suisse Broad Hedge Fund index returned 2.21% for the three-month period, followed by the Barclay Hedge Fund index, 1.96%; HFRI Fund Weighted Composite index, 1.6%; and the Eurekahedge Hedge Fund index, 1.33%.

Hedge funds of funds produced barely positive returns for the quarter with 0.89% for the HFRI Fund of Funds Composite index and 0.63% for Eurekahedge Fund of Funds index.

The broad hedge fund indexes all trailed the 5.4% S&P 500 index return in the first quarter as well as the 4.3% Barclays Aggregate Bond index return. The three-month return of the MSCI World index was 0.4%.

March was a particularly bad month for hedge funds, because ”the earthquake, tsunami and nuclear disaster in Japan, increasing turmoil in the Middle East, and the outlook for higher interest rates … all helped to drive stock and bond prices lower in developed nations,” wrote Sol Waksman, founder and president of BarclayHedge, in a news release. The company produces the Barclay Hedge Fund index, which was flat at 0.35% in the month of March.

Other hedge fund indexes were flat to negative in March, with the Hennessee Hedge Fund index returning 0.23%; Eurekahedge Hedge Fund index, 0.2%; Dow Jones Credit Suisse Broad Hedge Fund index, 0.12%; and HFRI Fund Weighted Composite index, -0.07%.

Returns of hedge fund-of-funds indexes were negative in March, with the Eurekahedge Fund of Funds index down 0.04% and the HFRI Fund of Funds Composite index down 0.07%.

The S&P 500 index return for March was -0.1%, while the Barclays Aggregate Bond index and the MSCI World index both returned 0.1%.