Hedge funds attracted marginally positive flows from investors last month, as the industry notched up a 3% weighted average gain in July following a torrid first half for investment performance.

• Investor allocations to hedge funds edged into positive territory in July, as the industry began to halt its first half losses
   
• Bigger was not necessarily better for allocators, with larger managers suffering the heftiest withdrawals in July
   
• Americas-based managers attracted the bulk of inflows, while equity-focused strategies saw the most capital withdrawals

Hedge funds attracted marginally positive flows from investors last month, as the industry notched up a 3% weighted average gain in July following a torrid first half for investment performance.

New data published by Citco shows investors poured some $8.6 billion into hedge funds throughout July, which outweighed the $7.4 billion that was withdrawn during the month, resulting in slightly net positive inflows for the industry of $1.2 billion.

Hedge fund firms managing between $1 billion and $5 billion in assets drew the highest net subscriptions in July. Here, managers attracted $2.7 billion of inflows, according to Citco, which provides asset servicing solutions to the global hedge fund and alternative investment industry. Managers with $1 billion and under also added some $200 million in allocations.

On the flipside, bigger did not prove to be better for capital allocators following the H1 market turmoil: the largest funds with AuM sizes of $10 billion-plus suffered net redemptions of $1.6 billion in July, while those in the $5-10 billion category registered marginal net withdrawals of $10 million.

Geographically, meanwhile, hedge fund firms based in the Americas took the bulk of new investor capital in July, drawing $2.1 billion in net subscriptions. Managers located in Asia and Europe recorded slight net redemptions of $500 million and $400 million, respectively.

In terms of strategy type, the ‘Citco Monthly Hedge Fund Update’ for July shows both hybrid strategies and global macro funds recorded the highest net subscriptions of $700 million, as equities saw the most net redemptions at $700 million.

The update noted that 69.9% of hedge funds notched up positive returns in July compared to just 28.5% of funds in June.

Total global hedge fund industry assets dipped below $4 trillion at the end of H1 according to broader industry estimates, thanks to a combination of disappointing investment performance and sustained capital withdrawals from investors.

Key Implication | Managers & investors: After hedge fund assets contracted during the first half of 2022 thanks to negative performances and allocator withdrawals, managers have been able to claw back losses in recent weeks. Although markets and economies remain volatile, the recent reversal in fortunes has meant investors have pledged more capital to the industry.