Total capital invested in hedge funds rose to a record in the third quarter, even as returns slipped in September, driven by fresh investment into funds with event-driven strategies, according to hedge fund research firm HFR.
Hedge fund capital totaled $2.82 tn at the end of the third quarter, an increase of 0.6 percent, or $18 bn, from the end of the second quarter, HFR says in a press release. In the first three quarters of the year, total capital rose by $190 bn, or 7 percent.
Investors added a total of $15.9 bn in new capital to hedge fund investment in the third quarter, about half of the $30.5 bn in new capital added in the previous three months, HFR adds. In the first nine months of the year, inflows totaled $72.7 bn, the highest for any nine-month period since 2007.
HFR says the increase in the third quarter stemmed mainly from funds devoted to event-driven strategies, or those devoted to trading in equities during share buybacks, financial distress, tender offers and other events, and fixed-income-based relative value arbitrage strategies.
Hedge fund performance was little changed in the quarter, however, with a decline of 0.09 percent in the HFRI Fund Weighted Composite Index, capping the gains in the first three quarters at 3.07 percent. In September the composite index declined 0.75 percent.
‘Global financial markets experienced a significant macroeconomic inflection point in the third quarter, driven by a combination of both expected and unexpected catalysts, contributing to strategy performance dispersion, increased trading activity, heightened asset volatility and strong capital inflows,’ says Kenneth Heinz, president of HFR, in a press release.
HFR adds that, for the first time since 2009, investment inflows into small and medium-sized hedge funds exceeded those of large firms. Funds with less than $1 bn under management saw inflows of $5.1 bn while funds with between $1 bn and $5 bn under management received $6.6 bn. Inflows to larger funds totaled $4.2 bn.
