Speculative Funds Targeting Big Gains in Volatile Market... Hedge Fund Capital Inflow Hits 7-Year High

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Major foreign media reported on the 24th (local time) that the amount of funds flowing into the hedge fund market in the first quarter of this year recorded the largest inflow in seven years. It is interpreted that speculative funds aiming for a big win poured in massively as financial market volatility increased due to factors such as the Ukraine war and the tightening moves of the U.S. Federal Reserve (Fed).

According to hedge fund market information firm Hedge Fund Research, the hedge fund industry saw a net inflow of $19.8 billion (approximately 24.6213 trillion KRW) in the first quarter of this year, the largest since the second quarter of 2015.

The net inflow of event-driven hedge funds, which seek profits by leveraging specific events, approached $13 billion, accounting for 66% of the total net inflow.

It is analyzed that many hedge fund investments targeted the increased volatility in oil prices caused by the Ukraine war. For example, the price of West Texas Intermediate (WTI) crude oil futures on the New York Mercantile Exchange (NYMEX) was in the mid-$70s per barrel at the end of last year, but after the outbreak of the Ukraine war, it surpassed $130 per barrel in early March, nearly doubling. When market volatility increases like this, following market trends well can lead to huge profits. However, the risk of large-scale losses also increases, causing significant divergence in performance among funds.

The overall hedge fund market size remained largely unchanged from the end of last year. Despite the large inflow of funds, the hedge fund industry as a whole recorded investment losses.

According to HFR, macro funds and relative value hedge funds earned $50.5 billion in profits, while equity and event-driven funds suffered losses of $76.2 billion.

The hedge fund industry as a whole recorded a 0.8% loss in the first quarter. However, this was better than the performance of the New York stock market’s S&P 500 index, which fell 4.6% in the first quarter. The S&P 500 index also showed significant volatility, at one point in the first quarter expanding its decline to 13.7% before substantially reducing the loss after mid-March.

This content was produced with the assistance of AI translation services.