Investors have continued to allocate new capital to hedge funds through and despite the volatile environment in the second quarter of 2011, with new allocations to the hedge fund industry totalling nearly $30 billion for the period, according to data released today by Hedge Fund Report in Global Hedge Fund Industry Report: 2Q11.

Together with the $32 billion in inflows from the previous quarter, inflows for the first half of 2011 exceeded $62 billion, the strongest half-year total since the second half of 2007, says HFR, when the industry saw $75 billion in inflows. The report said strong second quarter inflows offset a modest performance-based asset decline, and lifted the level of capital invested in the global hedge fund industry to $2.04 trillion.

In terms of strategy trends, investors were reported as favouring Macro, Relative Value and Quantitative strategies with the former two receiving over $20 billion of the new inflows. In terms of performance, Macro and Relative Value were at opposing ends of the spectrum in the second quarter, says HFR, with the HFRI Macro Index posting a decline of 1.7 per cent, while the HFRI Relative Value Index gained 0.76 per cent.

Systematic and quantitative strategies received $10 billion in new capital across various sub-strategies. Meanwhile, Equity Hedge strategies experienced inflows of only $1.7 billion in new capital in the second quarter, bringing the year-to-date inflow total for Equity Hedge to $8.1 billion, the lowest of the four main strategy groups.

“Financial markets continue to be dominated by uncertainty and volatility, and investors are allocating to hedge funds, expecting and anticipating this uncertain environment to persist. The many catalysts in this environment, including the European sovereign debt crisis, the debate surrounding the US debt ceiling, accelerating Asian inflation, fallout from bank stress tests, and mixed US employment and housing statistics, suggest risk is changing faster and more dynamically than ever before,” said Kenneth Heinz, president of HFR.

“Hedge fund investors are now more sophisticated than ever and are allocating to areas such as Macro, Relative Value and various quantitative strategies in anticipation of opportunities to be created by transition, volatility and risk,” he added.