Hedge funds experienced estimated total net outflows of $8.9 billion in the fourth quarter, research company HFR said in a report Thursday.
Performance-based asset growth, however, was significant during the quarter at an estimated $49.1 billion, well above the estimated $2.4 billion in the quarter ended Sept. 30, according to HFR data.
The increase in performance-based asset growth in the quarter ended Dec. 31 likely was, in part, the result of the HFRI Fund Weighted Composite index's 0.5% return. The index returned -0.3% in the quarter ended Sept. 30.
The performance-based gain for the fourth quarter was enough for HFR's estimated total hedge fund industry assets to exceed $4 trillion for the first time, at $4.01 trillion. Estimated assets for the previous quarter totaled $3.97 trillion.
Only one of four hedge fund categories tracked by HFR attracted positive net inflows, although all had positive performance gains. Relative-value hedge funds had net inflows of $800 million as well as positive performance-based gains of $900 million in the third quarter.
Event-driven strategies had net outflows of $400 million and a performance-based increase of $26.2 billion.
Equity hedge fund strategies had net outflows of $5 billion, but a positive performance-based gain of $19.5 billion, and macro strategies had net outflows of $4.3 billion and a performance-based increase of $2.4 billion in the quarter ended Dec. 31.
Kenneth J. Heinz, HFR's president, said in the report that the industry was able to exceed the $4 trillion milestone "by navigating through volatility associated with the second year of the global coronavirus pandemic and variants."
"Year-end capital flows also indicated institutions are actively and tactically rebalancing portfolios across strategies, sub-strategies and firm sizes, focusing intently on portfolio duration, credit and interest rate sensitivity, strategic commodity and equity market exposures, as well as advanced metrics of defensive capital preservation," Mr. Heinz added.
