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Total capital increased in 4Q by $120 billion on $10.5 billion of net inflows to $2.63 trillion, the sixth consecutive quarterly record, led by a surge in investor interest in Event Driven strategies, including Special Situations and Distressed/Restructuring funds, according to the latest HFR Global Hedge Fund Industry Report.
“The powerful increase in investor risk tolerance drove strong capital flows into hedge funds as both institutional and retail investors positioned for greater intra-market equity dispersion across equity portfolios, and an extension of the dynamic M&A and Activist environment that dominated 2013", says Kenneth Heinz, President of HFR.
“Hedge fund industry growth has continued to a record level of assets despite the challenges presented by a transitional regulatory environment, strong gains in traditional equities, and uncertain macroeconomic and political environments in 2013. With the US Federal Reserve beginning the process of tapering stimulus measures and economic pressures receding across the EU, the combined normalisation of interest rates, equity market valuations and investor risk tolerance is likely to contribute to a conducive environment for actively managed, long-short investing as investors hedge 2013 beta-driven gains in favour of differentiated, uncorrelated alpha in coming years.”