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Hedge Fund Performance, Asset Flows Healthy As 2021 Halfway Point Approaches

Nearly half-way through 2021, the global hedge fund industry continues to see strong performance and asset flows, with performance gains and new money boosting the industry to a new record $3.57trn AUM, according to eVestment’s May 2021 Hedge Fund Asset Flows report.

May’s hedge fund performance average of +1.48% brought year-to-date (YTD) hedge fund average performance to +9.05%, just two digits shy of the +11.05% industry average for all of 2020. Barring any major unforeseen market, natural or geo-political disasters – or pandemics – the hedge fund business this year is poised to outperform 2020 by a wide margin.

Event Driven – Activist hedge funds are big performance winners so far this year, returning +2.02% in May and an impressive +26.30% YTD. India-focused hedge funds had the strongest May performance among all fund types eVestment tracks, at +9.44%, which brings these funds’ YTD average performance to +23.12%.  Across the board, most fund types eVestment tracks were positive for performance in May, with the exception of FX/Currency funds, which returned an average of -0.20% in May and are at -2.18% YTD, and the 10 largest Long/Short Equity funds, which returned -0.24% in May and are just barely positive, at +0.44%, for the year.

Investors are rewarding the hedge fund business’ performance with billions in new money. Investors added +$12.01bn to the global hedge fund business in May, bringing YTD new AUM to +$39.12bn and helping push the business to the aforementioned record $3.57trn in assets. Inflows have been widespread as well, with 62% of hedge funds reporting to eVestment seeing new money, the highest percentage seeing net inflows since May 2016.

The big flows winner in May were Multi-Strategy hedge funds, which pulled in +$4.49bn in new money. “Net flows for these funds have been positive in seven of the past eight months,” said eVestment Global Head of Research Peter Laurelli. “And at +$20.06 billion YTD, this segment easily has seen more money come in on a net basis in 2021 than any other general strategy.”

Macro funds are also seeing strong demand, pulling in +$3.48bn in May, bringing YTD flows to +$5.62 billion. For the year, the story for Macro funds has not been as strong as Multi-Strategy funds, but is overall positive, said Laurelli. “Money began to come in to Macro funds toward the end of 2020 and except for a blip of outflows in March, the segment is seeing healthy allocations.”

Long/Short Equity funds are one major outlier in May’s data, with investors pulling -$1.19bn from these funds. YTD these funds have seen investors pull -$9.40bn. However, Laurelli notes that these redemptions are largely concentrated among a handful of Long/Short Equity funds that have underperformed and that the picture for the wider Long/Short Equity fund universe is more positive.

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