The Tell: Hedge fund assets hit $3.8 trillion after strongest first quarter in 21 years: HFR


Despite some well-publicized casualties and the ire of Redditors, hedge funds overall came through the first quarter strong, growing assets and posting their strongest performance for the period in more than two decades, according to data released Wednesday.

Read: Reddit crowd rejoices at report that Melvin Capital rang up a 49% first-quarter loss

Global hedge-fund assets rose to $3.8 trillion in the first quarter, up $201 billion, industry tracker HFR said in its latest Global Hedge Fund Industry Report. Total hedge fund industry capital is up by $844 billion over the past four quarters after falling below $3 trillion in the first quarter of 2020 as the global pandemic began, HFR said.

“The trading environment was dominated not only by the new U.S. presidential administration, new stimulus measures, developments in vaccine administration and new virus variants, but also intense volatility in cryptocurrencies and associated with a surge in interest in out of favor, heavily shorted, deep value equities from retail investors and trading platforms,” said Kenneth J. Heinz, HFR president, in a statement.

“Each of these, as well as evolving macroeconomic and geopolitical dynamics, represent both a risk and an opportunity for specialized hedge funds actively positioning in these areas,” he said.

Also see: New Super PAC for the Reddit crew already over $10,000 in donations

Net asset inflows contributed $6.1 billion in the first quarter, HFR estimated, brining total net new inflows since the third quarter to $22.1 billion. Meanwhile, the HFRI Fund Weighted Composite Index rose 5.97% in the first quarter, its strongest first-quarter return since 2000.

That topped a 5.77% return, including dividends, for the S&P 500

over the first quarter, while the Barclays Capital Government/Credit Bond Index lost 4.44% over the same stretch.

On an asset-weighted basis, the performance was less impressive. The HFRI Asset Weighted Composite Index was up 2.69% over the first three months of the year.

A focus on bitcoin

and other digital assets paid off for fund managers. The HFR Cryptocurrency Index topped all other strategies in the first quarter, rising 120% following a 2020 gain of 193%.

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Meanwhile, event-driven strategies, which focus on out-of-favor, deep value and equity credit positions — the same type of trades favored by retail traders — led both capital and performance strategy gains, HFR said. Total event-driven capital exceeded $1 trillion for the first time, joining the equity hedge category above that milestone.

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