Total hedge fund assets fell USD64.7 billion to start 2016, a decline of 2.1 per cent, which dropped total industry assets below the USD3 trillion level for the first time since the industry first surpassed the milestone in May 2014.
That’s according to eVestment’s latest hedge fund asset flows report which reveals that investor flows were negative in January with an estimated net USD21.5 billion redeemed. Performance accounted for an additional USD43.2 billion decrease. The combination of performance and net investor outflows reduced total industry assets to USD2.964 trillion. Flows have been weak or negative in all except one January since 2008 as investor redemptions from the prior year carry over before new assets are allocated en masse. February has historically been the barometer month for the year’s flows.
January’s redemptions of USD21.5 billion were the largest in the opening month for the industry since January 2009 and reflect dissatisfaction with losses in 2015. Investors redeemed a significant amount in January from funds which posted losses in 2015, USD24.8 billion. Both large and small funds that underperformed faced redemption pressures. Among products posting positive returns in 2015, on an aggregate basis, January flows were only positive to the large, best performers (>USD1 billion, >5 per cent).
Event driven fund flows were highly negative in 2015, particularly toward the end of the year. This redemption pressure continued into January 2016 and it’s clear that performance weighed heavily on investors’ decisions to part ways. Products with negative returns in 2015 accounted for the vast majority of January’s redemption pressures, while funds that returned greater than 5 per cent in 2015 actually saw positive investor interest to begin 2016.
