Hedge fund industry approaches $4 trillion in AUM

Reporting the strongest first-half hedge fund performance of any calendar year since 1999, HFR said the industry has now hit another asset record, with $3.96 trillion in AUM at the end of the second quarter.

Hedge fund capital grew by $360 billion from the start of 2021, soaring by over $1 trillion over the last five quarters.

In the second quarter, hedge funds reported net asset flows of $12.3 billion and reported inflows up strongly within uncorrelated macro strategies ($8.3 billion) as fixed income based relative value arbitrage capital surpassed $1 trillion in AUM.

Returns as measured by the HFRI Fund Weighted Composite Index of 10% in the first half of the year, which is the best first half since 1999.

Marking a shift perhaps in investor sentiment, total macro capital grew by $25.5 billion to an estimated $644 billion in AUM with both quantitative and fundamental macro sub-strategies seeing asset increases during the quarter. Systematic Diversified/CTA strategies led the way with growth of $11.6 billion as discretionary thematic funds added $5.8 billion.

“Recent growth has been driven across a broad continuum of strategies and macroeconomic portfolio scenarios, including balancing economic reopening/reflation trades with sharp reversals in these trends, including risks of additional virus variants, falling interest rates and possibilities for less robust economic growth over the intermediate term,” said Kenneth Heinz, president of Chicago-based HFR.

He pointed to the trend of global institutional investors expanding allocations to hedge funds in response to the fluid macroeconomic environment.

“Funds which have demonstrated their ability to navigate this market paradigm are likely to lead industry growth in 2H21,” he added.

Investor inflows were distributed across firms of all sizes, with firms managing greater than $5 billion receiving an estimated $5.5 billion of the $12.3 billion total of net new investor capital in the second quarter. Mid-sized firms managing between $1 billion and $5 billion experienced a similar net inflow of $5.0 billion for the quarter, while firms managing less than $1 billion collectively received estimated inflows of $1.8 billion.