Aggregate single and multistrategy hedge fund assets rose to a record $2.25 trillion as of Dec. 31, up 12.5% from a year earlier, according to year-end analysis from Hedge Fund Research.
The net growth of hedge fund assets was driven to a huge extent by performance gains, which totaled $209.9 billion across all strategy categories in the year ended Dec. 31.
The HFRI Fund Weighted Composite index returned 6.22% in the 12 months ended Dec. 31.
By contrast, net asset inflows were positive at $34.4 billion in 2012 but totaled less than half of 2011 net inflows of $70.6 billion, HFR number crunchers reported in the industry researcher's year-end report.
The quarter ended Dec. 31 experienced the least investment in 2012 at a net $3.4 billion, compared to $16.3 billion of net inflows in the first quarter, $4.1 billion in the second quarter and $10.6 billion in the third quarter.
Assets invested in hedge funds of funds rose 1.3% to $638.2 billion in the year ended Dec. 31, due primarily to performance gains of $8.2 billion. Hedge funds of funds experienced net outflows totaling $5.7 billion, the fifth year in a row that HFR reported a decline in cash flow.
The HFRI Fund of Funds Composite index returned 4.81% in 2012.
HFR reported that the event-driven hedge fund strategy category experienced the best performance-based asset gains in 2012 — $65.9 billion — although net outflows totaled $6.6 billion. The HFRI Event-Driven (Total) index returned 8.63% last year.
Equity hedge fund strategies amassed performance gains of $56.8 billion with net outflows of $10.7 billion; followed by relative value strategies, which had performance gains of $52.7 billion as well as strongly positive net inflows of $41.4 billion; and macro hedge fund strategies, which produced investment gains of $34.4 billion and net inflows of $10.3 billion.
The HFRI Equity Hedge (Total) index returned 7.42% in the year ended Dec. 31; the HFRI Relative Value (Total) index, 10.49%; and the HFRI Macro (Total) index, -0.37%.