Global hedge funds are poised to achieve positive inflows for the first time in three years, thanks to strong returns and an investor shift to alternative assets during a period of volatility and rising inflation.
Alternative assets data and analytics firm Preqin’s data has shown that hedge funds have attracted flows totalling $40.9bn (£30.9bn) in the first three quarters of the year, after outflows of $97.2bn (£73.5bn) and $44.5bn (£33.7bn) in 2019 and 2020 respectively, according to Reuters.
“Investors are looking to hedge funds to achieve a measure of diversification, particularly considering that the specter of inflation has recently entered the fray,” Benjamin Crawford, vice president and head of research at alternate investment data firm BarclayHedge, said.
“Several sectors of the hedge fund industry have a well-earned reputation for shielding assets from inflation.”
Analysts said the inflows are likely to rise further next year due to increased market volatility and uncertainty over the Omicron variant.
Data from Preqin showed global hedge funds gained 13.9 per cent on average between January and November this year, marking their third successive year of returns above 10 per cent. That compares with the MSCI global stock index’s gain of 12.4 per cent in the same period.
Event-driven strategies, which bet on corporate changes such as mergers and restructurings, led with a 15.1 per cent gain, while equity strategies delivered a 12.3 per cent gain.
On the other hand, macro strategy funds provided just seven per cent return in the first eleven months of 2021, compared with more than 14 per cent in 2020.
“Global macro hedge funds have been challenged, as some common themes at the start of the year have not played out as planned, such as the steepening yield curve theme and weakness in the US dollar,” Robert Christian, co-chief investment officer at K2 Advisors, told Reuters.
According to eVestment data, multi-strategy funds and managed futures funds were the biggest recipients of cash into hedge funds between January and October this year, taking in $24.7bn (£18.7bn) and $13.1bn (£9.9bn) respectively.