Hedge fund assets hit record $3.8 trillion in first quarter

By Maiya Keidan

TORONTO (Reuters) - Global hedge fund assets rose to more than $3.8 trillion in March 2021, driven by the best first-quarter performance in 21 years and more investors putting cash to work with the industry, according to data from Hedge Fund Research (HFR).

Hedge funds added another $201 billion and gained an average of 6% in the first three months of the year, according to the data.

Total industry assets fell to below $3 trillion in the first quarter of 2020 as the global pandemic hit economies around the world.

Cryptocurrency hedge funds led hedge fund gains between January and March 2021, surging 120% over the period.

Of the more traditional strategies, event-driven hedge funds, which bet on mergers and acquisitions and other corporate events, made 8.2% while equity-focused funds made 7.1%, showed the data.

Assets in event-driven strategies rose by $85.4 billion while equity funds added $62 billion and interest rate sensitive, fixed income-based relative value arbitrage strategies saw an increase of $39 billion for the quarter.

"The trading environment was dominated not only by the new US 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,” Kenneth J. Heinz, President of HFR, said in the release.

“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."

An index tracking the S&P 500 would have gained 5.8% over the same time period, HFR said.

(Reporting by Maiya Keidan; Editing by Kirsten Donovan)