Total hedge fund capital rose to a record in the second quarter of 2014, led by an increase in inflows to activist funds and arbitrage, according to analysis by Hedge Fund Research (HFR).
Capital increased to $2.8 tn, surpassing the record of $2.7 tn set in the previous quarter, as the allocation of new capital to hedge funds increased to $30.5 bn from $26.3 bn, the research firm says in a press release.
New investment into event-driven hedge funds ‒ those that promote activist strategies or focus on distressed companies ‒ jumped to $11.7 bn in the second quarter from $4 bn in the first quarter, HFR says.
New capital invested in funds with an activist focus rose to $5.9 bn in the second quarter from $3.5 bn in the first. The HFRI Activist Index, which measures the performance of activist funds, rose 2.8 percent in the first half. The second quarter saw a strengthening of the trend to more rapid growth in the larger, more established hedge funds with more sluggish increases in smaller, newer funds.
About $21.2 bn in new capital flowed to hedge funds with more than $5 bn in assets under management while funds with $1 bn-$5 bn under management received net allocations of $8.55 bn. Smaller funds received a combined total of less than $750 mn.
‘Investors and fund managers alike positioned strategically for the complex dynamics associated with an imminent end to US Federal Reserve stimulus measures, escalating geopolitical tensions, active participation in transactional M&A and extended valuation levels in equity markets,’ says Kenneth Heinz, president of HFR.
‘The record growth of industry capital clearly demonstrates that the requirement for dynamic exposure to all of these market trends via sophisticated, established and innovative hedge fund strategies has never been more imperative or in greater demand by investors.’
