Investor inflows in the first quarter helped boost total hedge fund industry capital to $3.1 trillion, according to the latest HFR Global Hedge Fund Industry Report, released Thursday.
Investors raised their allocations to event-driven and quantitative, trend-following systematic macro strategies, HFR said.
The quarterly increase of 1.6%, $47.2 billion, set a third consecutive quarterly record. In the trailing 12 months, total hedge fund capital has increased by 7.3%.
Hedge funds reported positive performance in all three months of the first quarter, extending a year-long stretch of positive returns.
“Sophisticated investors continue to strategically position for market trends that drive hedge fund performance, including oscillating patterns of optimism and reversals of the Trump, Yellen, Brexit and Euro trades, with each of these impacted by the increased possibility of geopolitical tensions and conflict,” HFR president Kenneth Heinz said in a statement.
“Funds that continue to demonstrate their ability to navigate these trends and generate strong performance will lead industry growth in 2017.”
HFR reported that investor outflows in the January-to-March period slowed to $5.4 billion, the lowest level since $1.5 billion was redeemed in the final quarter of 2015. This came on the heels of a $70.1 billion outflow for fiscal 2016, the biggest calendar year outflow since 2009.
Investors allocated some $3.5 billion to event-driven strategies in the first quarter, bringing total capital invested in these to $793.5 billion. The inflows were concentrated in diversified multi-strategy and distressed substrategies, which received $5.2 billion and $1.6 billion, respectively.
HFR said this was the first quarterly inflow into event-driven funds since the 2015 third quarter, and represented a trend reversal from 2016, when investors withdrew $38.1 billion.
Investors allocated $730 million of net capital to macro funds in the first quarter, bringing total capital invested to $579.2 billion. Systematic strategies led macro substrategy net inflows with $4.9 billion of new capital.