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Investors allocated $18.2 billion in net new capital to hedge funds in 1Q15, the largest inflow since 2Q14. The HFRI Fund Weighted Composite Index® gained +2.3 percent in 1Q15, the best quarterly gain in 5 quarters and largest outperformance of US equities since 3Q11.

Equity Hedge (EH) led all strategy inflows, with investors allocating $9.6 billion in new capital to the strategies, the largest increase since 1Q14. Total capital invested in Equity Hedge increased to over $820 billion, with EH sub‐strategy inflows led by Fundamental Value, which saw inflows of $4.1 billion. EH: Multi‐ Strategy and Fundamental Growth also attracted new capital in 1Q, with these receiving inflows of $1.9 billion and $1.7 billion, respectively. The HFRI Equity Hedge Index gained 2.1 percent for 1Q15, trailing only Macro strategies for YTD performance.

Investors allocated $3.8 billion of new capital to Event Driven (ED) strategies, with inflows led by dynamic Shareholder Activist funds, increasing total capital invested in ED strategies to $775 billion. Activist funds experienced inflows of $3.9 billion for 1Q, increasing total capital invested in Activist funds to $127.5 billion; the HFRI ED: Activist Index gained +3.2 percent in 1Q15. ED Multi‐Strategy also experienced inflows in 1Q of $1.0 billion, with these partially offsetting an outflow of $1.5 billion from Special Situations funds. The HFRI Event Driven Index advanced +1.9 percent for 1Q15 after posting a narrow gain of only +1.1 percent for 2014.

Fixed Income‐based Relative Value Arbitrage strategies also experienced inflows in 1Q15 with investors allocating $2.3 billion of new capital to RVA sub‐strategies; RVA led all strategies for 2014 with an inflow of $45.5 billion. The 1Q inflow and performance gains increased total RVA capital to $775.9 billion, trailing only EH and nearly identical to ED capital. RVA inflows were led by Multi‐Strategy and Fixed Income: Corporate sub‐strategies, with these receiving inflows of $1.5 billion and $1.2 billion, respectively. The HFRI Relative Value Arbitrage Index gained +1.8 percent in 1Q15 as markets discounted a potential interest rate increase in the US while the ECB announced QE stimulus measures, with the latter driving fixed income yields to historical lows and negative nominal levels for many European sovereigns.

Macro hedge funds posted the first quarterly inflow since 3Q13, as the HFRI Macro Index gained +3.3 percent for 1Q15 with gains driven by systematic, trend following CTA strategies. Investors allocated $2.6 billion of new capital to Macro strategies, bringing total Macro capital to $568 billion. Macro sub‐strategy inflows were led by Systematic Diversified and Multi‐Strategy, which experienced inflows of $1.6 billion and $1.4 billion, respectively. The HFRI Macro: Systematic Diversified/CTA Index gained +4.8 percent for 1Q15, leading all sub‐strategy performance.
Investors allocated $12.6 billion (69 percent) in new capital to firms with greater than $5 billion in assets under management, while allocating $5.5 billion to firms with less than $5 billion (31 percent) AUM. Firms with greater than $5 billion in assets manage 69 percent of all industry capital, but represent approximately 6.2 percent of all hedge fund firms industry wide.

“The powerful hedge fund performance trends which emerged in late 2014 accelerated through 2015, with quantitative, trend following CTA’s posting uncorrelated gains across long US Dollar, long fixed income and short oil positioning, completing the best eight month performance period for CTAs since April 2008,” stated Kenneth J. Heinz, President of HFR. “In addition to CTA’s, increased opportunities for shareholder activists in M&A, as well as the recent spike in trading volume in Hong Kong and China, have also contributed to recent performance gains. Investors responded to the strong performance quarter by increasing allocations across nearly all hedge fund strategies, a trend which is likely to continue as global equity market volatility remains elevated, driving global hedge fund assets over $3 trillion by mid‐ 2015.”

press release

www.hedgefundresearch.com

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