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Performance issues taking a toll on hedge funds

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Investors withdrew an estimated USD7.88 billion from global hedge funds in June 2018, bringing overall Q2 2018 net flows for the industry to -USD5.43 billion, according to the eVestment June and Q2 2018 Hedge Fund Asset Flows Report.

Industry assets under management (AUM) stood at USD3.308 trillion at the end of the quarter and signs of industry consolidation continue to present themselves. Among investors, the new report shows a strong demand for funds that have performed well, with a preference for size, and clearly investors are willing to remove assets from those funds not meeting expectations.
 
Among primary strategies, Macro funds are among the big winners this year, with AUM up USD2.89 billion in June, up USD6.24 billion for the second quarter and up +USD14.82 billion so far this year. However, looking more closely shows that over 60 per cent of reporting Macro funds faced net redemptions in June and products with net inflows were dominated by a small handful of funds.
 
Fixed-income-focused Emerging Markets products were the primary cause of top-line redemption figures from Emerging Markets funds in June, with AUM falling -USD1.49 billion in June. This follows across the board performance problems in Emerging Markets funds this year, as noted in eVestment’s June/Q2 2018 Hedge Fund Performance Report. Funds focused on countries like China, India and Russia are deep in the red this year, following exceptional performance in 2017.
 
There has been no prolonged evidence of interest in MBS-focused products since 2014, until now. June was the fifth consecutive month of net inflows (+USD1.27 billion in June), the longest streak of positive sentiment since 2010. This year, MBS-focused products have brought in an additional USD4.53 billion, bringing overall AUM in the segment to USD91.1 billion.
 
Among primary hedge fund strategies, Multi-Strategy funds were the biggest losers for June and YTD. Investors pulled USD4 billion from these funds last month and have pulled a total of USD8.26 billion this year. Multi-Strategy funds remain one of the largest primary segments, however, with AUM standing at USD528.29 billion.
 

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