Event-Focus Hedge Funds Drive Inflows in First Quarter, HFR Says

(Bloomberg) -- Hedge fund inflows climbed in the first quarter as investors piled into funds that specialize in mergers, activism and relative value arbitrage, according to Hedge Fund Research Inc.

Net inflows totaled $1.1 billion at the end of March, according to a report Thursday by the industry researcher. It marked the fourth straight quarter of inflows following an increase of nearly $10 billion for the prior year.

Total hedge fund assets globally increased $4.5 billion to a record $3.22 trillion, according to the report. Event-driven funds attracted the most money with inflows of $4.4 billion in the quarter. Relative value arbitrage strategies had inflows of $2.3 billion over the same period.

Money managers have been reluctant to put capital into hedge funds amid years of underperformance and high fees. Stock hedge funds, in particular, have lost their sheen among investors as they move toward cheaper, passive index funds.

Total hedge fund gains were dampened by outflows of $6.6 billion from stock hedge funds, according to the report.

Event-driven funds have been a bright spot, up 0.2 percent in the quarter. An index measuring event-driven hedge funds returned 7.6 percent last year, after rising 10.6 percent in 2016.

The dominant trends in the quarter “included broader equity market outperformance and defensive positioning as it pertains to overall equity market valuation, as well as specific to the trade and tariff volatility which accelerated through the end of the quarter,” HFR President Kenneth J. Heinz said in the statement.

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