Hedge fund industry assets rose to $3.32 trillion in the fourth quarter, a record high, on investor optimism over the record U.S.-led economic surge, data from Hedge Fund Research show.
The rise in assets represents a quarterly increase of more than $80 billion, a news release said.
Still, the overall industry suffered estimated net outflows of $13.6 billion in the fourth quarter, driven by $8 billion in outflows from relative value arbitrage.
Total equity hedge capital was $972.5 billion as of Dec. 31, after experiencing net inflows of $1.8 billion. The HFRI Equity Hedge (Total) index rose 5.7%% in the fourth quarter.
The HFRI Fund Weighted Composite index advanced 3.5% for the three months ended Dec. 31.
Event-driven strategies saw $4.8 billion in net outflows in the quarter, but performance gains brought the assets in this category to $852.2 billion as of Dec. 31. The HFRI Event-Driven (Total) Index gained 2.9% in the fourth quarter.
Fixed-income-based relative value arbitrage strategies led strategy outflows in fourth quarter as investors redeemed an estimated $8 billion, led by outflows of $6 billion in multistrategy funds. The HFRI Relative Value (Total) index returned 2% in the fourth quarter, expanding total RVA assets to $877.3 billion.
"The hedge fund industry concluded a historic decade of growth, which began in the aftermath of the financial crisis and saw total capital double in size, as the strongest performance in a decade propelled industry capital to a new milestone," Kenneth J. Heinz, president of Hedge Fund Research, said in the news release. "While 2019 was dominated by risk-on sentiment and upside volatility, many of the risks for which managers have strategically positioned remain as potential catalysts for dislocations," he said.
Macro strategies experienced an estimated $2.6 billion in outflows, the seventh consecutive quarter this sector saw outflows, ending Dec. 31 with $600 billion in assets. The HFRI Macro (Total) index declined 0.5% in the fourth quarter, while the HFRI Macro index (Asset Weighted) gained 0.5% during the quarter.