Investor redemptions from hedge funds in October outpaced new allocations for the second consecutive month resulting in a slight net outflow of USD2.9 billion (only 0.10% of AUM), according to eVestment.
The industry has not had two consecutive months of outflow since the wake of the 2012 edition of the European sovereign crisis.
Investor sentiment towards equity-focused hedge funds was negative for the second consecutive month October, confirming a deviation from the positive trend which had been in place the preceding 14 months. October redemptions appear more related to elevated losses in June and July, rather than due to recent volatility. The implication being that with elevated losses across the universe in September, redemption pressures for equity strategies may persist into year-end.
After three consecutive months of negative asset-weighted performance, preceded by one month of nearly flat returns, investor flows for credit strategies turned negative in October. The universe had not produced three consecutive months of negative asset-weighted returns since the 2008 financial crisis, though losses in mid-2011 during the onset of Europe’s difficulties were greater than the universe’s current drawdown.
Despite recent positive performance, managed futures funds continue to face redemption pressures, further evidence that investor flows do not react immediately to near-term success.
