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Hedge Funds Continue Strong Start to 2021 With Elevated Asset Flows

Global hedge funds continued their strong start to 2021 with elevated asset flows in February, according to eVestment's February 2021 Hedge Fund Asset Flows Report. Positive flows for the industry in February have been the norm since 2009, but the $16.44bn investors added to hedge funds last month, coupled with January’s inflows, made this the best two-month start for the business since 2014. Strong performance in January and February was also a plus, bringing the hedge fund industry’s overall AUM to $3.407trn.

According to eVestment Global Head of Research Peter Laurelli, eVestment data shows the majority of funds seeing new money in February. “Reported data indicated over 60% of funds had net inflows in February, following about 50% that saw new money in January,” he said. “This means the incoming assets are being relatively widely distributed.”

Multi-Strategy hedge funds were the big asset winners among major hedge fund strategies eVestment tracks, with investors adding +$5.34bn to these funds in February. This also puts Multi-Strategy funds at the top of year-to-date (YTD) new money among major strategies, with investors adding +$8.98bn since the beginning of 2021.

Event Driven hedge funds were another big asset winner in February, pulling in +$2.47bn in new money. This brings their YTD total of new money to +$3.30bn. Long/Short Equity funds saw strong investor interest in February, with investors adding +$2.23bn to these funds last month. These funds are negative for flows YTD at -$1.47bn, however. 

"More than half the funds in this universe actually have seen net inflows YTD and removing a small handful of products which had a difficult stretch, overall net flows would be firmly positive," said Laurelli.

Net flows for emerging markets focused funds appear uninspiring at first – essentially flat in February and YTD, but looking at various segments of emerging markets tells another story. Redemptions have come from funds focused on Eastern Europe and Latin America, while there have been meaningful allocations to Macro-oriented Emerging Markets funds and to those focusing on Chinese equities. Managed Futures funds saw the biggest investor redemptions in February, but even that amount of outflows, -$160mn, was small. The other two major strategies in the red for assets in February – Distressed Funds and Market Neutral Equity – both saw less than -$80mn leave.

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