Hedge fund industry assets increased to a record high of $3.245 trillion in the second quarter, driven primarily by strong investment performance as well as inflows to larger firms, according to new data released Friday by Hedge Fund Research.
The previous record was $3.244 trillion in assets, made in the third quarter of 2018.
The June 30 increase from $3.18 trillion three months earlier was driven by strong investment performance and a drop in estimated net redemptions to $4.8 billion following two quarters that saw a total of $45 billion in net outflows, according to a news release announcing the new data.
Total equity hedge capital was $931.3 billion as of June 30, with performance gains partially offset by net outflows of $5.5 billion. The HFRI Equity Hedge (Total) index returned 1.76% in the quarter ended June 30. Technology led all industries, with the HFRI Equity Hedge: Technology index gaining 2.9%.
The HFRI Fund Weighted Composite index was up 1.89% for the three months ended June 30, while the HFRI Asset Weighted Composite index was up 2.12%.
Event-driven strategy assets had estimated net inflows during the second quarter of $5.3 billion to finish at $854.9 billion in assets under management as of June 30.
Relative-value hedge funds, meanwhile, saw net inflows of $1.6 billion to bring total AUM to $865.6 billion as of June 30.
"Constructive, yet fluid developments in ongoing trade negotiations, as well as expectations for lower U.S. interest rates in the near term, have also contributed to an evolving macroeconomic outlook which has resulted in record levels for U.S. equities," Kenneth J. Heinz, president of Hedge Fund Research, said in the news release.
He added that the increase "also represents a forward risk for valuations, especially with trillions of dollars of fixed-income obligations trading with negative yields. Funds which are effectively positioned for the complexities of this environment, maintaining tactical long and short exposures across not only hedge fund strategies, but also across cryptocurrency and risk parity exposures, are likely to attract institutional investor capital throughout (the second half of 2019)."
Hedge funds with more than $5 billion in assets under management generated net inflows of $5.4 billion during the second quarter, while funds with less than $5 billion in AUM saw net outflows totaling $10 billion. It is the first quarter in which the largest hedge funds saw net inflows since the fourth quarter of 2017, according to the news release.