The Morning Brief: Investors Pouring Money Back Into Hedge Funds

April 20, 2017   Stephen Taub


The investment vehicles attracted nearly $16 billion in net new money in the last month alone.

Investors are starting to return to hedge funds. After the industry in December suffered its largest monthly outflow since April 2009, capping a year of net outflows, hedge funds enjoyed net increases of capital in each of the first three months this year. In fact, investors poured $15.7 billion into hedge funds in March alone, the largest amount in the past 20 months, since August 2015, according to a new report from data tracker eVestment.

"For the hedge fund industry to be successful and grow assets outside of performance gains, it must offer investors something they cannot access elsewhere at a cheaper cost," eVestment asserts in a press release. "Additionally, market conditions must be such that those offerings are attractive, regardless of prior or recent performance. This is exactly what we’re seeing after one quarter of 2017 is in the books."

However, the distribution of these inflows was far from equal. According to eVestment, just 52 percent of funds in its database gained assets, while 48 percent lost assets.

The majority of the new money went into macro, managed futures, and quantitative equity strategies. Macro inflows were the largest since January 2010. Altogether, investors pumped $11.46 billion into macro.

"Investors are showing clear demand for strategies which focus on thematic approaches to major public and derivative markets," eVestment states in its report.

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Pershing Square Holdings, the publicly-traded closed-end fund offered by Bill Ackman’s Pershing Square Capital Management, announced it will buy back up to 5 percent of its shares. As part of the deal, it will boost the ownership limit to 4.99 percent from the current 4.75 percent so those investors near the current limit will not breach the ceiling. PSH will use general corporate funds to fund the buyback. "PSH believes that the repurchase is a good use of cash and will assist in reducing the current discount between its share price and its NAV," Pershing Square says in a press release. The stock now trades at a roughly 15 percent discount to NAV, a relatively inexpensive way to get into Ackman’s fund if you qualify and are bullish on the activist.

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Singulex, which develops direct molecular detection technology and cardiovascular monitoring, announced it closed on a $50 million senior-secured debt facility with health care hedge fund Perceptive Advisors.

"Perceptive Advisors is pleased to partner with Singulex in their journey to advance understanding and enable immediate action to identify and treat a range of disease," said Sam Chawla, portfolio manager at Perceptive, in a press release. "The company has a proven record of results and partnerships with leading health and life science innovators."


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