Worldwide aggregate hedge fund assets reached an estimated $3.801 trillion as of March 31, data by Hedge Fund Research showed.
The total represents a 5.6% increase from $3.6 trillion three months earlier, the fourth straight quarter of rising assets, according to the firm's quarterly asset flow report released Wednesday.
Hedge fund assets fell 11% to $2.957 trillion in the quarter ended March 31, 2020, due primarily to the economic impact of the COVID-19 pandemic.
Investment returns were the primary driver for the increase in assets in the first quarter, accounting for $195.4 billion in asset gains, while estimated net inflows totaled $6.1 billion.
The HFRI Fund Weighted Composite index returned 6.1% in the quarter ended March 31, the best performance for a first quarter since 2000.
All four hedge fund categories had positive investment returns, and three of four had positive net inflows for the three months ended March 31.
The event-driven category had the largest performance gain at $86.2 billion, while experiencing $800 million in estimated net outflows.
Equity hedge strategies produced aggregate investment gains of $62.3 billion and net inflows of $400 million; relative value strategies had investment gains of $33.2 billion and net inflows of $5.6 billion; and macro strategies had $13.5 billion in performance gains and $900 million in net inflows.
Kenneth J. Heinz, HFR's president, said in a news release accompanying the data that hedge funds effectively navigated a volatile trading environment in the first quarter.
"The trading environment was dominated not only by the new U.S. presidential administration, new stimulus measures, developments in vaccine administration and new virus variants, but also intense volatility in cryptocurrencies and associated with a surge in interest in out of favor, heavily shorted, deep value equities from retail investors and trading platforms," Mr. Heinz said.
"Each of these, as well as evolving macroeconomic and geopolitical dynamics, represent both a risk and an opportunity for specialized hedge funds actively positioning in these areas," Mr. Heinz said. "Leading institutional investors interested in defensive, opportunistic exposures to each of these are actively working to increase portfolio exposures to leading and innovative hedge funds, which have and continue to navigate these rapidly shifting market dynamics."