Hedge funds saw modest gains in the first quarter, with the Hedge Fund Research’s HFRI Fund Weighted Composite Index gaining 2.56%. Hedge funds saw inflows of $13.7 billion during the quarter, while a rising market contributed $54 billion to the hedge fund industry’s $1.67 trillion in total capital.

The largest hedge funds benefited from the inflows, with firms in excess of $5 billion in assets pulling in $14.9 billion in new investment dollars. Hedge funds under that asset level experienced net outflows of $3.7 billion in the first quarter. Hedge funds in excess of $5 billion now account for 62% of all industry capital.

Drivers in the first quarter were significantly different than they were over the past two years, said Ken Heinz, president of Hedge Fund Research in Chicago. While a negative equity environment dominated hedge funds’ performance until recently, a positive market has brought with it falling volatility, increased corporate credit and sovereign credit risk and led to favorable foreign currency adjustments.

The industry has evolved as a result of the financial crisis, which led to the closure of around 2,000 hedge funds. “The industry is now using lower levels of leverage, hedge funds’ strategies are more specialized and they’re more transparent to investors,” Heinz said.