eVestment noted that the gains in assets were due to both new allocations and performance gains. This was listed as the fourth consecutive month of elevated inflows – making year-to-date inflows of $93.3 billion. Another observation is that this makes 2014 the largest five month total to begin a year since 2007.
Is any of this a worry? Think back to what was happening in 2007 and 2008, which was just before the recession.
eVestment’s report said,
“Performance gains added $37.8 billion to total AUM for an estimated asset weighted return of 1.28% in May, well above the 1.00% the industry produced on an equal weighted basis during the month. For the first five months of 2014, equal and asset weighted returns are nearly identical, both just below 2.00%.”
The key observation here is that allocations to equity continued in May, and has been a theme since June 2013. May saw some $11.5 billion added to equity strategies and 2014 year-to-date inflows were $59.4 billion (also the highest five month span since mid-2007).
Investors in May also showed inflows into alternative credit strategies, event driven strategies (including activist strategies), Mortgage-backed securities strategies, and macro hedge fund strategies.
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How large the hedge fund industry can grow may be anyone’s guess. When it was $2 trillion, there were questions whether it could make it to $3 trillion or $4 trillion. Now that $3 trillion has been hit, the next hurdles will be $4 trillion – or even $5 trillion.
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