Q1 2013 was also a record quarter for Japanese hedge funds, which attracted 10.8% more capital in the first three months of the year than they did in Q4 2012.
The news may further validate predictions made earlier in the year that total hedge fund assets will reach $2.5trn by the end of the year, an increase of 11% on 2012 figures.
Regional scores
Asia ex-Japan and European hedge funds outperformed underlying markets by 0.98% and 0.8% respectively during the first three months of the year.
In terms of returns, Japanese managers posted the strongest returns during March, the fourth consecutive month in which they have led the market in terms of performance. March was also the seventh consecutive month of positive returns for Japanese hedge fund managers.
European hedge fund managers outperformed the MSCI Europe Index by 0.8%, as the Eurekahedge European Hedge Fund Index went up 0.19% during March, compared to the former index which was down 0.61%.
Performance by strategy
Distressed debt hedge funds posted the strongest performance in March, continuing a nine-month trend, and made gains of 1.9%.
In terms of inflows, long/short equity strategies attracted the most new capital, reporting $10bn in inflows between January and the end of March. This is in line with expectations given the current equities rally, investor appetite for risk and the robust historic performance of funds of this strategy.
There were net outflows from CTA/managed futures and macro funds during the first three months of the year which is unsurprising given that these funds have traditionally underperformed in rallying markets.
The continued uptick in hedge fund performance will be of comfort to investors, a significant proportion of which were disappointed with hedge fund performance during 2012.
Funds of hedge funds
Net outflows from funds of hedge funds continued in the first quarter of 2013, while the number of multi-manager vehicles in market declined, as did the number of new vehicles brought to market.
The declining popularity of funds of hedge funds can be attributed to a number of factors, not least their underperformance in comparison to single-manager hedge funds and the higher fees attached to multi-manager funds.
Further, funds of hedge funds are often used as a stepping stone into the industry for new investors; once they become more au fait with the asset class they look to invest in single-manager funds, which results in redemptions from funds-of-hedge-funds holdings.
In terms of performance during the quarter, the Eurekahedge Funds of Funds Index was up 2.18% in the first two months of the year.
