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Hedge Funds

HFR: Hedge fund industry AUM reaches fifth consecutive quarterly peak

Hedge fund industry assets hit a new peak of $3.152 trillion as of Sept. 30 — the fifth consecutive quarter of record-breaking assets under management — data released Thursday by Hedge Fund Research showed.

Combined asset growth for hedge funds and hedge funds of funds for periods ended Sept. 30 was 1.6% in the quarter, 4.3% year-to-date and 6.1% for 12 months.n

Fully 97% of asset growth in the third quarter was the result of investment performance gains — $50.3 billion from investment returns and $1.7 billion was from net inflows.

Third-quarter net inflows, while positive, significantly lagged the $6.7 billion of inflows in the quarter ended June 30, but were a dramatic improvement over net outflows of $28.2 billion in the third quarter of 2016, HFR data showed.

If the current pace of investment and positive investment performance continues, the global hedge fund industry likely will end the year with positive net inflows, in contrast to net outflows of $70.3 billion in 2016. Net inflows year-to-date Sept. 30 totaled $2.9 billion.

By strategy category, HFR's data showed that macro funds received the highest net inflows of $4.2 billion in the quarter ended Sept. 30, with performance gains of $3.5 billion. Event-driven strategies followed with $3.5 billion of net inflows and $12.4 billion of investment performance. Equity hedge funds experienced $2.9 billion of net outflows but produced the highest investment gains of $28.1 billion. Net outflows for relative value hedge funds were $3.1 billion and investment performance was $6.3 billion.

In the year ended Sept. 30, the total number of hedge funds in operation dropped by 94 funds to 8,255 while the universe of hedge funds of funds declined by 102 funds to 1,475.

"Following 18 months of strong equity market and hedge fund performance, many institutions … continue to explore the increased use of alternatives and alternative beta as mechanisms to insulate portfolios from potential market corrections and to increase the likelihood of achieving their required returns," said Kenneth J. Heinz, HFR's president, in a news release accompanying the report.

"We expect these trends to continue through year-end, driving industry growth into 2018," Mr. Heinz added.