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Alternative Credit News, Hedge Fund News, Private Equity News

Hedge Fund Net Inflows Top $23bn In First Three Quarters Amidst Increased Volatility

The global hedge fund industry saw positive net inflows of $6bn in Q3 amid increasing volatility, totalling net inflows of $23.7bn in the first nine months of 2021, according to data from asset servicer Citco.

All hedge fund strategies and most AuA categories on the Citco platform delivered positive returns in Q3. While the quarter showed relatively good hedge fund performance, it was nonetheless a departure from Q1 and Q2: funds on the platform delivered a 1.15% overall weighted average return in Q3, versus 8.25% and 6% in Q1 and Q2 respectively.

Event-driven was the best performing strategy, delivering a weighted average return of 6.46%, while Multi-strategy was the worst, with a 0.39% return. Continuing the trend from the previous quarter, larger funds with over $3bn of assets produced the highest returns, with an average of 1.57% in Q3.

For the second quarter in a row, Citco observed a strong correlation between volatility and trading volumes. Despite a relatively quiet July, Q3 volumes were the second busiest on record after Q1 2021 as a result of a sharp spike in volatility in September. Equity and Equity Swaps continued to be the most traded asset classes in Q3, but there was a 36% increase in Fixed Income products, Credit Default Swaps and Interest Rate Swaps in September, indicating a broader use of this product group among hedge funds.

Treasury volumes continued to hit all-time highs, increasing 44% year on year in Q3, with an average of over 30,000 payments in July, August and September.

"Despite significant volatility in September, global hedge funds have demonstrated their resilience to achieve positive returns across asset classes, fund strategies and geographies," said Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd.

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