Assets held in hedge funds grew 4.41% during the second quarter, to $2.973 trillion, according to data released Monday.
HedgeFund.net reported in its survey of hedge administrators that investors allocated $34.21 billion to hedge funds in the quarter and performance gains added $91.28 billion of asset value.
The dollar amount of fund liquidations during the quarter was larger than that of fund launchings by an estimated $8.52 billion; this was the third-highest level of fund closures on record.
Despite liquidations, large funds appear to have attracted enough capital to expand the industry overall at an organic growth rate of 11.06% from a year earlier.
Funds of hedge funds had net withdrawals of investor assets in the quarter for only the second time on record. Fund of hedge funds liquidations exceeded fund introductions and allocations to existing funds by $470 million, HedgeFund.net reported.
Performance gains actually lifted total fund of hedge funds assets by 2.43%, to $1.439 trillion, from the previous quarter.
European hedge funds had the most organic growth. New allocations of $21.47 billion to such funds raised total assets by 2.62%. Combined with performance gains, European hedge fund assets rose 4.80%, to $857.65 billion.
Funds operating in Asia saw total assets fall an estimated $3.12 billion. Redemptions alone took away $1.14 billion of asset value from Asian hedge funds.
For the third consecutive quarter, investors reduced allocations to equity hedge fund strategies and increased allocations to fixed-income-related strategies.
Equity-focused hedge funds had net outflows of $6.18 billion compared to the previous quarter, but performance gains lifted these funds' assets 2.16% in the quarter.
Fixed-income strategies had organic growth of 3.04% during the quarter, and when combined with performance gains, assets in fixed-income-focused funds grew 6.55%, to $613 billion.
Funds focused on corporate fixed-income-related securities accounted for most of the increase. These funds had organic growth of 7.59%, despite a slight net outflow for fund liquidations. Funds focused on mortgage-related fixed-income securities had the highest growth rates among fixed-income strategies in the second quarter. These funds' assets grew 19.05%, to $35.04 billion, and organic growth contributed the vast majority of the increase.
Allocations to emerging-market hedge funds have slowed in the past three quarters, according to HedgeFund.net. In the second quarter, new allocations expanded total assets by 0.64% from the previous quarter, compared to a 10.64% growth rate a year earlier.
Performance gains during the quarter enabled emerging-market assets to grow 2.55%.
Event-driven and special situations funds experienced record growth in the second quarter. Assets in these funds grew 16.31%, to $390.42 billion.