Opalesque Industry Update – Steady inflows and performance-based gains increased hedge fund assets by $60 billion in the fourth quarter, bringing total industry capital to a record $2.25 trillion, according to the latest HFR Global Hedge Fund Industry Report, released today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. |
Hedge funds posted performance gains in 4Q12, as global financial markets struggled with the political and macroeconomic uncertainty which had adversely impacted performance throughout much of the year, including the European banking and sovereign debt crisis, and the U.S. fiscal cliff negotiations.
The HFRI Fund Weighted Composite Index advanced +1.3 percent in 4Q, topping the global equity market decline, and bringing full-year 2012 HFRI FWC Index performance to +6.2 percent. Investors continued to allocate new capital to the hedge fund industry, with net asset inflows of $3.4 billion in 4Q, bringing total 2012 inflows to $34.4 billion.
Full year performance gains and capital inflows by strategy were led by fixed income-based Relative Value Arbitrage (RVA). The HFRI Relative Value Index was up +10.5 percent for 2012, the fourth consecutive calendar-year gain; the RVA Index has generated positive performance in 41 of 48 months since the nadir of the Financial Crisis in December 2008. Investors allocated $6.5 billion of new capital to RVA in 4Q, bringing full-year capital inflows to $41.4 billion; these inflows vaulted RVA to the largest strategy area of hedge fund capital with $609 billion, overtaking Equity Hedge as the top strategy area for the first time since 1991.
Event Driven was the top-performing strategy in 4Q with a gain of +3.22 percent, finishing the year up +8.6 percent. However, investors also withdrew capital from this strategy, resulting in a 4Q12 outflow of $3.5 billion and completing a year that saw total net redemptions of $6.6 billion from Event Driven funds. Total assets in Event Driven strategies ended 2012 with $558 billion. Equity Hedge strategies turned in positive performance in the volatile 4Q12, with the HFRI Equity Hedge Index gaining +1.86 percent. Despite this 4Q gain, investors withdrew $1.2 billion from Equity Hedge funds in 4Q12 and a total of $10.4 billion on the year. Total assets in Equity Hedge strategies finished 2012 at $598 billion.
Macro hedge funds posted a decline for 2012, with the HFRI Macro Index falling by -0.40 percent, with losses in Systematic/Quantitative CTA strategies. The HFRI Macro: Systematic Diversified Index fell by -2.7 percent in 2012 on weakness in Currencies and Commodities. Despite the performance decline, investors continued to favor Macro strategies in 2012, as Macro funds experienced net inflows of $1.66 billion in 4Q and $10.3 billion for the full year; assets managed by Macro hedge funds ended 2012 at $488 billion.
HFR launches HFRU Indices, designed to track hedge funds compliant with UCITS guidelines
“Performance and capital flow trends, including the rise of Relative Value Arbitrage funds and the proliferation of hedge funds compliant with UCITS guidelines, reflect a significant and fundamental shift in the hedge fund landscape as the industry evolves to meet investor requirements in coming years,” stated Kenneth J. Heinz, President of HFR. “Investor preferences have moved away from opaque, black-box, illiquid and high equity market beta strategies and have moved to embrace high quality strategies offering transparency, liquidity, tactical flexibility, strategic innovation, accessible account minimums, institutional risk management and consistent performance gains. In these ways, the evolved hedge fund industry will continue to appeal globally to individual investors as a vehicle to access sophisticated, transparent, long-short strategies, as well as to institutional investors as a powerful complement to existing equity and fixed income exposures.” www.hfru.eu.