Investor flows for hedge funds down in December but up for 2013

The latest eVestment Hedge Fund Asset Flows Report covers trends in the hedge fund world for the month of December and all of 2013.  A few highlights are below.

1) Investors illustrated their disapproval of macro funds’ 2013 performance with their largest monthly redemptions since December 2008.
2) Macro and managed futures fund redemptions were the primary reason hedge fund flows were negative in December, the first monthly outflow in the last six months. The industry still took in $22.3 billion in Q4 and $71.9 billion in all of 2013.
3) Performance added $190.1 billion to industry AUM in 2013. When combined with investor inflows  there was an overall increase of $262.0 billion, or 10.1%, the industry’s biggest asset increase in three years. Total industry AUM ended 2013 just below its all-time peak of $2.94 trillion set in June 2008.
4) Equity flows surpassed credit in Q4 for only the second time since Q1 2010. **During the hedge fund industry’s high-growth phase of 2003-2007, investors overwhelming preferred equity strategies to credit. However, in the twenty-five quarters since Q3 2007 credit strategies have either gained more or lost fewer assets than equity strategies in all but six. The high-growth phase led by equity allocations coincided with the last multi-year stretch when UST 10-year rates were either steady or climbing since the late 1970’s/early 1980’s.
5) Activist strategies led event driven/distressed flows and performance in 2013. Event driven and distressed strategies took in a combined $14.9 billion in 2013. Activists, which had the segment’s best average returns in 2013, accounted for a disproportionately large amount of the segment’s flows. Of the 70 activist strategies tracked by eVestment, accounting for over $66 billion in AUM, the group had an estimated inflow of $4.97 billion in 2013.