Data published by HFR suggest total global hedge fund capital rose for an 11th consecutive quarter in the second quarter of 2015, as investors allocated $21.5bn in net new capital.
This was the largest quarterly inflow since the second quarter of 2014, and saw allocations concentrated in equity hedge and relative value arbitrage strategies, HFR said.
Total industry capital hit $2.97trn globally.
The biggest hedge funds were able to attract the biggest flows, the data also suggests. Net flows to firms managing more than $5bn totalled $15.7bn through the second quarter of this year. This came on top of first quarter flows of $29bn allocated to what HFR describes as “top firms”.
Overall the biggest firms manage some 69% of total hedge fund industry capital, even though they represent just 6% of the number of management firms.
In terms of strategies attracting capital, equity hedge saw its total capital hit $847bn by the end of the second quarter, making it the largest strategy area, with about 28.5% of all hedge fund capital globally, HFR said.
The HFRI Equity Hedge index gained 4.1% through the first quarter this year, making it the strongest outperformance against US equities since the first quarter of 2010.
Other indices have also performed well. The HFRI Relative Value Arbitrage index added 2.56% over the first quarter; and the HFRI Event Driven index added 2.6% over the period.
However, in contrast to the full year 2014, in which the HFRI Macro index led all other strategy indices with a gain of 5.6%, so far in both the first and second quarters of 2015, macro strategies have had relatively small inflows from investors, HFR suggests. Overall, macro strategies still account for some $550bn globally or about 18.5% of industry capital.
Kenneth Heinz, president of HFR, said: “Macroeconomic volatility increased to conclude the first half of 2015 with dislocations across China, Greece and oil, as well as on anticipated US Federal Reserve interest rate increases, all contributing to financial asset volatility and increased investor uncertainty entering the second half of the year.”
“As a result of this, investors have increased allocations to sophisticated hedge fund strategies which reduce equity and fixed income market beta, as well as to the most well-established hedge fund managers. While the US economic expansion has continued, investor risk tolerance has decreased as a function of June volatility, driving capital allocations to the industry’s largest funds in anticipation of strong returns through volatile conditions in the second half of 2015.”