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Record levels of M&A activity in the first five months of 2021, including several large deals, like WarnerMedia's merger with Discovery, presented event-driven hedge fund managers with multifarious opportunities to employ arbitrage strategies.

This month HFM reported that $750m Samson Rock Capital had taken advantage of the environment for event-driven managers to launch a new special situations business, led by industry veteran, Rado Bradistilov. Meanwhile, Dallas-based Saltoro Capital, which has returned 92% over 12 months, hired UBS Securities' global head of hedge fund sales with a view to securing entry into the hedge fund billion-dollar club.

All this marks a contrast to H1 2020 when event-driven funds fared considerably worse than other hedge fund strategies during the onset of Covid-19. Following significant net outflows in 2020, event-driven has built on strong performance towards the end of last year by becoming the top-performing strategy of 2021 YTD. Early signs are that this has sparked investor interest, which will continue into H2.

The average macro fund reporting to HFM gained 1.6% in May, taking the HFM Macro Index's YTD return to 5.3%, trailing the HFM Global Composite YTD by over three percentage points (8.8%). Having been wary of macro funds for much of the past 18 months, pulling more than $20bn from the strategy in 2020, investors have seen enough from recent performance numbers and economic indicators to increase and/or create macro exposure.

Investor flows added $3.7bn to macro assets in May, turning YTD flows positive for the first time since January, and look set to remain positive over the coming months. Provisional data from HFM's latest biannual investor sentiment survey suggests a third of hedge fund allocators are looking to increase their exposure to macro funds in H2 2021 - more than for any other top-level hedge fund strategy.

Experienced managers will hope to benefit from increased allocations as investors look to navigate the threat of inflation in the US, a slow economic recovery and the prospect of global price dislocations. Moreover, the likelihood of increased interest rates in the medium term and rapidly rising equity and commodity prices will facilitate greater volatility and potential returns for macro funds during the next 18 months.