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Hedge fund assets hit record high despite quarterly outflows — HFR report

Hedge fund industry assets hit yet another new peak of $3.24 trillion as of Sept. 30 — the ninth consecutive quarter of record-breaking assets under management — despite investor outflows, data released Thursday by Hedge Fund Research showed.

Third-quarter net outflows totaled $9.1 billion, following $3.1 billion in net outflows for the second quarter. For the year, investors have redeemed an estimated $11.1 billion of hedge fund industry capital.

Despite redemptions, hedge fund performance drove assets up. Combined asset growth for hedge funds and hedge funds of funds for periods ended Sept. 30 was 0.3% over the quarter, 1% year-to-date and 2.9% for 12 months.

In the year ended Sept. 30, the total number of hedge funds in operation rose by 54 funds to 8,389, while the universe of hedge funds of funds declined by 48 funds to 1,371.

"Total hedge fund capital increased to a record despite a modest investor outflow as U.S. financial markets began (the fourth quarter)near an inflection point in interest rates, economic growth and equity market valuation," said Kenneth J. Heinz, HFR's president, in a news release accompanying the report.

By strategy, HFR's data showed that macro funds experienced $3.83 billion in net outflows in the quarter ended Sept. 30, resulting in a loss of $5.05 billion to $589.17 billion in estimated assets. Event-driven strategies followed with $2.4 billion of net outflows and ended the quarter with an estimated $847.1 billion in assets, a gain of $2.35 billion from the end of the previous quarter.

Meanwhile, equity hedge funds experienced $2 billion of net outflows yet produced a total of $955 billion in assets, a $6.24 billion gain from the end of the second quarter. Net outflows for relative-value hedge funds were $880 million yet these funds posted an estimated gain of $4.84 billion, to $853.03 billion as of Sept. 30 from June 30.

"Critical drivers of investor allocation trends have expanded from performance and asset under management to also include an intense focus on fees, liquidity, firm management, European credit risk, social responsibility and interest-rate risk-factor sensitivities," Mr. Heinz added. "Funds which are able to position for and navigate this shifting transitional inflection point in financial markets are likely to lead industry performance and growth into 2019."