Positive quarter for hedge funds
Hedge funds performed strongly across the board in the March 2011 quarter, with strong inflows and positive returns across most of the sector.
Hedge funds overall were up 2.2 per cent for the quarter, according to the Dow Jones Credit Suisse Hedge Fund Index quarterly review, with eight out of 10 sector strategies finishing in the black.
The industry recorded net inflows of $10.1 billion, although small funds (those with less than $500 million in assets) actually experienced net outflows as larger funds gathered $12 billion during the quarter.
The best performing strategy was convertible arbitrage, which gained 4.5 per cent over the quarter as managers benefited from large institutional investors seeking to increase their exposure in the space.
Equity market neutral gained 3.5 per cent on the back of opportunities created by sector rotations and stock reversals, and event driven gained 3 per cent through favourable corporate developments and the accelerating pace of mergers and acquisitions. Between inflows and performance gains total industry assets rose to around $1.8 trillion by the end of the quarter, up from $1.7 trillion at 31 December, 2010.
The favouritism shown to larger funds by investors was “perhaps the most telling indication of current investor sentiment,” according to the report.
Large funds saw net inflows in each month of the quarter, while mid-tier funds (those with between $150 million and $500 million) and smaller funds each saw net outflows in each month of the quarter. This is a clear indication of the increasing preference for larger scale managers that have the established infrastructure and resources sought by investors, the report stated.
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