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Hedge funds record net outflows in September… American institutions lose faith in hedge funds…

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Hedge funds recorded net outflows of USD9.5 billion as long/short equities, event-driven, and macro funds strategies reported the largest outflows, Eurekahedge’s preliminary data for September 2014 reveals. However, year-to-date, hedge funds are up 3.82 per cent, witnessing net inflows of USD60.7 billion in 2014.

According to Eurekahedge’s October 2014 report, the preliminary data for September revealed that managers have posted performance-based losses of USD1.2 billion, the current amount of assets under management in the global hedge fund industry stood at USD2.13 trillion as of September 2014.
North American funds clocked net asset outflows of USD5.2 billion while posting performance-based losses of USD.8 billion during September, with exposure to equities accounting for the bulk of the performance-based losses. European fund managers saw net outflows of USD2.6 billion, as redemption pressure has built up over the past three months thanks to manager performance remaining lukewarm compared to other regions.
Interestingly, Asia was the only region to clock net asset inflows in September, garnering another USD.5 billion. Moreover, India-investing hedge funds contributed record gains, reporting their ninth consecutive month of positive returns, with 2.44 per cent up for the month and 30.65 per cent year-to-date.
Tracking asset flows for September, the Eurekahedge report highlights that barely any strategies recorded positive asset flows, with fixed income being the sole strategy that didn’t witness net investor redemption. Long/short equities, event-driven, and macro funds accounted for the bulk of the outflows as investors redeemed USD3.3 billion, USD2.3 billion and USD2.0 billion, respectively, from these strategies.
According to the Eurekahedge report, hedge funds hit a rough patch during September after clocking a profitable month in August. In September, most strategies reported losses, while CTA/managed future funds was the one bright spot, topping the table for the second month in row and gaining 2.29 per cent:
US institutions are losing their appetite for hedge funds and private equity, according to a new survey by Pyramis Global Advisors.
The problem seems to be both performance – a full 31 per cent of US respondents felt hedge funds were the investment approach least likely to meet expectations over the long term – and fees – only 19 per cent felt hedge funds and private equity were worth the fees.

Pyramis polled 811 investors in 22 countries during the summer of 2014, including 191 US corporate pension plans, 71 US government pension plans, 48 non-profits and other US institutions, 90 Canadian pension plans, 283 European and 128 Asian institutions including pensions, insurance companies and financial institutions. Together, the respondents had assets under management of USD9 trillion.
Hedge fund managers and private equity firms may want to look to Asia, where 91 per cent of respondents felt the fees were worth it, or Europe, where 72 per cent did.
Among respondents planning an allocation increase to illiquid alternatives over the next one to two years, Asia leads the way with 79 per cent, followed by Europe (57 per cent) and the US (22 per cent).
Fortress Investment Group, the first publicly traded private-equity and hedge-fund manager in the US, said third-quarter profit fell 15 per cent as expenses rose and investment income dropped.
Pretax distributable earnings, which exclude some compensation costs and other items, decreased to USD55 million, or 12 cents a share, from USD65 million, or 13 cents, a year earlier, New York-based Fortress said in a statement today. The results fell short of the 16-cent average estimate by seven analysts in a Bloomberg survey.
Fortress has slumped 16 per cent this year as its private-equity investments are failing to exceed benchmarks required for the firm to collect carried interest, or its slice of profits. Its liquid hedge fund group, which oversees USD7.5 billion and can invest across stocks, bonds, currencies and geographies has also struggled. Its main macro fund was down 4.9 per cent this year through September and 9.3 per cent as of Oct. 24. Fortress’s Asian macro fund lost 4.1 per cent through September and 7.3 per cent through Oct. 24. Globally, macro hedge funds gained 2.1 per cent in the first nine months of the year, according to data compiled by Bloomberg.
Shares of Fortress closed at USD7.20 in New York on Wednesday (29.10.14). The stock is down 61 per cent since the company’s February 2007 initial public offering, when it sold shares at USD18.50 apiece to become the first US-listed buyout and hedge-fund manager.
Hedge-fund firm Serengeti Asset Management LP last week recommended buying Fortress shares as they are “exceptionally cheap” and the firm should pay a significant dividend in the next couple of years.
Fortress’s businesses include private equity, credit, liquid hedge funds and a traditional-money management unit called Logan Circle Partners. The firm’s assets rose to USD66 billion from USD63.8 billion at the end of the second quarter.
Archipel Asset Management AB, a Swedish hedge-fund firm that makes trades based on computer algorithms, is closing after its biggest backer pulled out, citing a lackluster performance.
The stock-trading fund founded in 2007 is returning cash to participants following the departure of Brummer & Partners, a Stockholm-based investor in hedge funds, said Stefan Nydahl, Archipel’s partner and chief investment officer to Bloomberg.
“The quantitative models serving as the foundation of the fund’s asset management activities have experienced difficulties generating returns,” Nydahl said in a statement on Brummer’s website that he confirmed in an e-mail today. He said Archipel lost 3 per cent in 2013 and 1.3 per cent in the first nine months of this year.
Brummer’s investment accounted for about 85 per cent of Archipel’s USD740 million assets under management, according to the firms. It is pulling out because Archipel “has not met expectations over the last few years,” Brummer said in a separate statement on its website.
The Newedge CTA Index, which tracks 20 trend-following funds, fell an average of 2.2 per cent during the three years ending 31 December. It’s up 6 per cent this year. Such funds use computer algorithms to identify patterns in markets, which have been convulsed by abundant central bank funding and other changes in underlying conditions since the 2008 global financial crisis.

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