eVestment’s final 2014 hedge fund asset flows report shows industry assets still above USD3 trillion, a milestone hedge funds crossed earlier in the year, but redemption pressures present in December.
Total hedge fund assets fell 0.61% in December to end 2014 at USD3.041 trillion. Redemptions were elevated in December, a trend which has persisted in December of each of the last four years and is likely a seasonal factor, rather than an indication of negative investor sentiment towards the industry at the end of 2014.
Investors withdrew USD13.2 billion from hedge funds in December. The redemptions were enough to push Q4 flows to negative USD8.4 billion, the industry’s first quarterly decline in six quarters and its largest outflow since Q4 2012.
Despite December’s outflow, 2014’s total inflow of USD98.2 billion was the industry’s largest since 2007. The industry received inflows of USD61.7 billion in 2013 and USD24.9 billion in 2012.
Managed futures strategies finally ended 15 consecutive months of investor redemptions with USD1 billion in net inflows in December, following a string of recent solid returns.
The two segments receiving the most investor interest in the first half of 2014 also had the largest redemptions in December. Multi-strategy and long/short equity funds lost USD4.1 billion and USD3.2 billion in December, but full-year inflows for each surpassed 2013’s numbers.
Virtually all of the year’s hedge fund inflows came in the first six months of 2014. Whether that is due to seasonal allocation preferences by institutional investors, or a negative reaction to performance in the face of global volatility, will have to wait to be known.