The hedge fund industry in the third quarter continued to regain assets lost in the first three months of the year from the early panic of the COVID-19 outbreak, data released Wednesday by Hedge Fund Research showed.
Worldwide aggregate hedge fund assets rose 4.1% to $3.31 trillion in the quarter ended Sept. 30, a bit less than the 7.4% gain in the prior quarter, according to the firm's quarterly asset flow report.
In contrast, hedge fund assets declined 11% in the first quarter of 2020 to $2.96 trillion.
Over the nine-month period ended Sept. 30, the hedge fund industry nearly regained its peak AUM of $3.32 trillion on Dec. 31, HFR data showed.
In a news release accompanying the report, HFR researchers noted that hedge fund industry AUM grew a total of $132.8 billion in the quarter.
The $13 billion of net inflows in the quarter ended Sept. 30 were the first positive flows HFR has tracked since the first quarter of 2018, when net flows were $1.1 billion, researchers said in the report.
However, aggregate hedge fund investment gains of $119.8 billion across strategies were the main reason for the rise, compared to investment gains of $231.7 billion in the prior quarter and investment losses of $333.2 billion in the first quarter of 2020.
The HFRI Fund Weighted Composite returned 4.2% in the quarter ended Sept. 30 vs. 9.2% in the prior quarter and -11.6% in the first quarter of 2020.
For the quarter ended June 30, HFR reported that all four of its broad strategy categories experienced net outflows and positive aggregate returns.
In the quarter ended Sept. 30, each hedge fund category produced positive aggregate performance and three had net inflows:
- The equity hedge category had the largest performance gain, at $46.9 billion, with $400 million of net inflows.
- Event-driven strategies produced aggregate investment gains of $40.1 billion and $200 million of net outflows.
- Relative value strategies had $26 billion of investment gains with $5.5 billion of net inflows.
- Macro strategies had the highest net inflow of $7.2 billion with $6.8 billion of investment gains.
In the news release, Kenneth J. Heinz, HFR's president, attributed the hedge fund industry's positive net inflows to investors who "allocated new capital to hedge funds in the third quarter as a result of both defensive outperformance through coronavirus-driven volatility in early 2020 as well as (from) opportunistic gains through the uneven financial market recovery in the second and third quarters."
He added: "Institutions globally are making forward-looking allocations to hedge funds, anticipating and positioning for the near-term uncertainties of both the virus and the U.S. election, as well as intermediate-term macroeconomic uncertainties of the U.S., European and Asian economies into 2021."