Global macro, equity drive May hedge fund gains

Citco reported hedge funds generated a weighted average return of 3.6% in May, bringing year-to-date performance to 7.9%. The month extended the industry’s rebound from the first-quarter sell-off and coincided with continued investor demand.

Global macro strategies led performance for a second consecutive month with a 5.3% return, followed by equity strategies at 4.8%. Event Driven funds returned 4.7%, multi-strategy funds 2.7% and Fixed Income Arbitrage managers 0.8%. Commodities strategies were the only major category to finish lower, down 2.6%.

Larger managers outperformed smaller peers in May. Funds with more than $3 billion in assets under administration returned an average 4.7%, while funds managing $1 billion to $3 billion returned 2.5%. Funds below $200 million delivered an average gain of 0.6%. The proportion of managers reporting positive returns fell to 69.3% in May from 90% in April, and the spread between the strongest and weakest performers narrowed to 7.7% from 11.2%.

Investor allocations remained positive. Hedge funds attracted $9.2 billion of net inflows in May and recorded $22.5 billion of gross subscriptions. Total net inflows for the industry reached $53.8 billion year to date.

Multi-strategy funds drew $6.3 billion of net new capital in May and $32.2 billion year to date. Equity strategies received $2.1 billion in May. Fund of Funds and Hybrid strategies each took in about $900 million.

Despite strong returns for the strategy, global macro saw net outflows of $900 million in May. The largest managers captured most new capital: firms with more than $10 billion in assets gathered $7.7 billion in May and have attracted $42.1 billion so far this year. Managers in the $5 billion to $10 billion range recorded positive inflows, while smaller firms reported more modest net additions.

Regionally, European managers raised $4.9 billion in May, managers focused on the Americas gathered $3.2 billion, and Asia-focused funds received $1.1 billion. European managers accounted for nearly 60% of hedge fund net inflows year to date.

May marked the fifth consecutive month of net inflows for hedge funds, with multi-strategy and equity allocations registering the largest gains in fundraising and performance.