Dow Jones, Credit Suisse Examine Q1 Hedge Fund Results

Large funds became larger, while small funds became smaller

In its 2011 Q1 Hedge Fund Industry Review, released Tuesday, the Dow Jones Credit Suisse Hedge Fund Index team revealed that large hedge funds, with more than $500 million AUM, brought in more than $12 billion of inflows; on the other hand, smaller funds experienced net outflows for Q1. Large funds also outperformed smaller funds during the quarter, returning 2.2% compared with 2.0%.

The report, which examines the drivers of hedge fund performance and asset growth in the first quarter of 2011, also found that:

  • Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, saw gains of 2.2% in the first quarter, and posted positive performance in each month of the quarter
  • The industry saw an estimated $10.1 billion in inflows in the first quarter. If this pace is maintained for the rest of 2011, the industry is on track to double the asset inflows received in 2010
  • Global macro experienced the largest inflows in the first quarter, gaining $3.3 billion followed by fixed income arbitrage (+$2.9 billion) and managed futures (+$2.8 billion)
  • Including performance gains, current hedge fund industry assets under management (AUM) grew to $1.8 trillion as of March 31, 2011, up from $1.7 trillion on December 31, 2010.

Convertible arbitrage performed the best in Q1, up 4.5%, as large institutional investors increasing their exposure contributed to increased valuation. Equity market neutral funds gained 3.5%, and event-driven managers were up 3%.

Fixed income arbitrage, as mentioned above, did well, but the Bank of Japan snapped their ten-month performance rally in March with the injection of major liquidity into the market. This drove yield lower and also had a negative impact on managers with substantial Japanese market exposure.

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