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In terms of investor flows, event-driven funds attracted net $3bn in August, taking the strategy's three-month total (since June) to nearly $8bn. Event-driven funds have now seen flows of over $11bn YTD, a significant contributor to the industry's overall net inflow of $65bn. Almost half of private wealth and intermediaries plan to increase their allocation to event-driven funds during the rest of 2021, and almost one-third of all allocators plan to do the same. Less than one-fifth of allocators intend to decrease their investments in event-driven funds.

After a seismic 2020, which saw event-driven withdrawals comprising $14.9bn out of a total of $42.4bn outflows, 2021 has been a positive period. More than 90% of event-driven funds posted positive returns YTD 2021 compared to 79% of hedge funds and 88% of fund of hedge funds. Event-driven continues to be well suited to the current period of excess dry powder, low interestrates and lofty stock market valuations. As private capital reserves grow, so too do event-driven indices and opportunities.

With many distressed companies facing immediate liquidity issues from the pandemic, larger managers with dry powder are particularly well placed to capitalise on new buying opportunities. Given these factors, HFM expects to see an acceleration in the proportion of investors increasing their allocations to event-driven from the numbers captured during investor surveys from earlier in theyear. The revival in event-driven opportunities during H1 2021 has only gathered pace in H2, and we can expect further positive movement for the strategy as capital markets begin to normalise after the mass vaccine rollout and continuation of economic stimulus packages.

Macro trailing other strategies YTD after mixed August

August saw the average macro hedge fund return to positive territory with a 0.4% gain after declines of -0.4% and -0.6% in June and July, respectively. But in what was a strong month for hedge funds generally, HFM's Macro index was the second worst-performing top level strategy index. Macro funds were also bottom of monthly flows ranking, shedding net $1.4bn; one of only two top-level strategies to suffer a net outflow in August along with relative value arbitrage. Macro has now seen a net outflow of $2.2bn for the year. In 2020, investor flows for macro totalled $22.6bn. However, HFM data suggests that larger hedge funds are a notable drag on the macro investor flows data, with 53% of macro funds reporting positive flows YTD compared to 50% across all hedge funds.

YTD performance across macro strategies is now 4.8%, trailing all top-level strategies, the HFM Global Composite at 9.5%, and S&P 500 at 20.4%. The proportion of macro hedge funds to post positive returns stands at 70% compared to 79% of all hedge funds and 88% of fund of hedge funds. Despite the positive performance, and even with progress on the vaccine rollout and lockdowns steadily reducing, investors remain wary of macro funds after 2020 and will need to see improved performance before allocating enthusiastically. Almost half of intermediaries, a third of private wealth and almost a third of all allocators are looking to increase their allocation to macro hedge funds during 2021

Furthermore, recent HFM research suggests inflows will continue over the coming months, with almost one third of investors surveyed in May planning to increase allocations to multi-strategy funds in H2, including almost half of private wealth investors and intermediaries.

Experienced managers will hope to benefit from increased allocations as investors worry about the threat of inflation in the US, economic tension within China and the realistic prospect of global price dislocations. Moreover, given the turbulent geopolitical climate, global macro funds are well-placed to deploy capital opportunistically across geographies and asset classes. The likelihood of steadily increased interest rates in the medium term and rapidly rising equity and commodity prices in the near-term will facilitate greater volatility and potential returns for macro funds during the next eighteen months.