With the news this week that CalPERS is exiting hedge funds, eVestment’s latest August 2014 Hedge Fund Asset Flows Report shows continued increase in hedge fund assets, with a portion of that rise attributable to institutional investors.
The report includes some information from the traditional side of the investment world to highlight our contention that institutional demand for hedge funds, particularly equity strategies in 2014, is viably strong. The volume of assets rotating across the traditional institutional investment arena is important because it shows there is a lot of money which needs a home. And in this environment of record equity markets in the United States and global tensions, demand for alternative exposures to equity and credit markets make a lot of sense for today’s institutional investors, says report author Peter Laurelli, eVestment vice president of research.
Below are some highlights from the report.
- Institutional demand appeared to remain strong towards hedge funds in August. Investors added an estimated $12.6 billion and total industry AUM again reached an all-time high of $3.068 trillion.
- Demand for hedge funds may be coming in part from massive liquidations of institutional holdings of US equity strategies. Institutional investors have redeemed nearly $600 billion from US equity exposure in the last 2.5 years.
- Investor interest in equity strategies, particularly event driven funds, has been the key driver of hedge fund growth in 2014. Event driven strategies received over $4 billion in August and over $42 billion YTD.
- Activist strategies took in nearly half of all new assets to event driven funds in August bringing total AUM in funds that may employ activism over $93 billion.
- Flows for funds investing in European markets were negative in August for the first time in the last 12 months. European markets have seen meaningful directional moves over the last several months, however the persistent flows prior to August are yet another sign investors will turn to alternative strategies in the face of market volatility.