Hedge fund industry assets dropped slightly to $3.24 trillion in the third quarter, due to mixed flows across strategies, heightened fixed-income risk, and volatility and fluid global political developments, data from Hedge Fund Research show.
The Sept. 30 increase from a record $3.25 trillion three months earlier was driven by estimated net outflows of $6.8 billion for the quarter, partially offset by capital inflows generated by new fund launches, a news release said.
Total equity hedge capital was $919.6 billion as of Sept. 30, after experiencing net outflows of $7.9 billion. The HFRI Equity Hedge (Total) index declined 1.1% in the third quarter, while the HFRI Equity Hedge (Asset Weighted) index fell by 0.65%.
The HFRI Fund Weighted Composite index was up 0.3% for the three months ended Sept. 30, while the HFRI Asset Weighted Composite index was down 0.4%.
Event-driven strategy assets had estimated net inflows of $5.7 billion during the third quarter, ending with $852.2 billion in assets under management as of Sept. 30.
Relative-value hedge funds, meanwhile, saw net inflows of $186 million to bring total AUM to $868.3 billion as of Sept. 30.
"Total hedge fund industry capital was little changed in Q3 as a number of contributing factors had partially offsetting impacts and influences, including, but not limited to, beta reducing re-balancing and reallocation, liquidations and launches, and an increase in market volatility associated with ultra-low interest rates," Kenneth J. Heinz, president of Hedge Fund Research, said in the news release.
"The capital raising environment continues to be challenging, with geopolitical and macroeconomic factors motivating allocations for some investors while contributing to complacency and hesitation for others," he said. "It is likely that sophisticated investors will proceed with strategic allocations in coming quarters which improve overall portfolio-expected returns through efficient, opportunistic long-short exposures."
Total capital invested in macro strategies increased by $6.1 billion from the prior quarter to end at $599.5 billion for the quarter ended Sept. 30, as performance gains offset investor outflows. The HFRI Macro (Total) index gained 1.5% for the quarter, while the HFRI Macro (Asset Weighted) index rose 1.9% over the course of the third quarter.
Investors withdrew an estimated net $4.8 billion in the third quarter, driven by net outflows of $3.6 billion from macro: multistrategy funds, while active trading strategies experienced $66 million in inflows.