Event-driven strategies led the hedge fund sector’s recovery in both performance and inflows terms in the second quarter of 2014, according to two reports into the asset class.
Having experienced the worst start to a year since 2008 in the first quarter, hedge funds posted average returns of 2.51% between April and June, according to Preqin.
While macro and emerging markets funds led the way in the second quarter, event-driven funds have topped the charts in the first half of the year with an average gain of 5.24% as a wave of global merger and acquisition activity boosted these strategies. In addition, 20% of hedge fund searches conducted in the second quarter were for event-driven portfolios, Preqin said.
Meanwhile, eVestment’s latest report into the hedge fund sector said event-driven funds led inflows in the second quarter of 2014, bringing in $15.5 billion in new assets.
More broadly, hedge funds broke through a record level of assets under management in April and reached $3 trillion in May, eVestment said. The growth rate in the first half of the year for the hedge fund industry was its highest since the financial crisis and the best start to a year since 2007, the group added.
eVestment also noted that performance was still a major driver of the direction of flows in and out of different strategies.
“Investors have been allocating to funds able to perform decently and actively redeeming from underperformers,” the group said. “Strategies returning greater than 5% in the twelve months leading up to Q2 2014 received an estimated $6.8 billion in the quarter, while those returning less than 5% had a net $4.1 billion of outflows.”
Amy Bensted, head of hedge fund products at Preqin, said: “Despite the relatively volatile start to the year, investors are continuing to allocate to hedge funds and a healthy number of new searches and mandates were issued during the second quarter.
“Hedge fund managers will be hoping to build on more encouraging performance in May and June in order to continue attracting inflows from the institutional community.”
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