NEW YORK Investors poured $72.2 billion into hedge funds worldwide in the first five months of 2014, marking their strongest five-month start to a year since 2007 partly on fears of a downturn in stock and bond prices, data from a survey showed on Tuesday.
Hedge funds attracted $16.9 billion in investor cash in May, down from inflows of $19.1 billion in April but enough to push the industry's assets to $2.3 trillion, or just under a six-year high, according to data from industry groups TrimTabs/BarclayHedge.
Appetite for hedge funds, which use various techniques to deliver so-called "uncorrelated" returns that are independent from traditional stock and bond markets, has accelerated this year partly on caution toward highly priced stocks and bonds.
"Investors in hedge funds are cautious about valuations in other markets, including stock, bond, and real estate markets," said David Santschi, chief executive officer at TrimTabs Investment Research.
Fixed income hedge funds attracted the most new cash in May at $6 billion, while inflows into multi-strategy hedge funds outpaced all other categories for the first five months of the year at $21.3 billion.
There were strong net inflows into hedge funds over the first five months of the year despite underperformance compared to stocks and bonds over the period.
Hedge funds returned 2.4 percent on average over that period, according to data from TrimTabs/BarclayHedge, lagging the 4.1 percent and 3.9 percent gains of the S&P 500 stock index and Barclays U.S. Aggregate Bond Index, respectively.
Santschi said investors in hedge funds have avoided better-performing stocks and bonds due to reluctance to buy at current expensive levels, in addition to concerns of a pullback in prices.
The S&P 500 has risen 7 percent this year through Monday and remains near record levels after gaining nearly 30 percent in 2013, while the Barclays index has gained 3.4 percent through Monday. The average hedge fund globally gained 3.2 percent in the first half of the year, according to HFR data.
(Reporting by Sam Forgione; Editing by Chizu Nomiyama)