Hedge funds perform despite investor withdrawal
25 November 2016 London
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Hedge funds are continuing to grow overall assets under management (AUM) in 2016 in the face of skittish investor sentiment, according to Preqin’s latest research.
Assets under management captured by Preqin’s data analysts rose to $3.24 trillion at the start of Q4, despite being hit by $66.7 billion net outflows, resulting in 2.9 percent of total AUM growth between January and September.
When breaking the hedge fund industry down by strategy, Preqin’s data reveals that equity and macro strategy funds overcame net investor redemptions to see their AUM grow in the first three quarters of the year, while credit, relative value and multi-strategy funds all saw their total assets fall.
Of those reviewed by Preqin, smaller hedge funds, categorised as under $100 million, saw less outflows in Q3 (38 percent) than their larger counterparts (49 percent) and also saw more inflows (45 percent) than funds over $100 million (37 percent).
By region, North American funds were marginally more likely to see outflows than inflows (42 percent to 40 percent respectively).
All other regions saw more inflows than outflows.
Amy Bensted, head of hedge fund products at Preqin, said: “2016 has been a difficult year for the hedge fund industry; ongoing investor concerns about the performance of the asset class and the fees that funds charge have made both raising and retaining investor capital increasingly challenging for hedge fund managers.”
“As a result, outflows have increased over each of the three quarters in 2016 to date, and nearly every leading strategy has seen net redemptions from investors.”
“However, strong industry performance and the resulting growth in total industry assets under management strike a more positive note. The Preqin All-Strategies Hedge Fund benchmark has added positive returns throughout Q2 and Q3, and the industry has enjoyed its largest performance gain since 2012 to 2013.”
“Therefore, while investors may continue to pull capital out of hedge funds in the short term, if managers can continue this run of strong returns, particularly in unpredictable markets, and prove their role in institutional portfolios, then we may see inflows return to the industry in 2017.”
Assets under management captured by Preqin’s data analysts rose to $3.24 trillion at the start of Q4, despite being hit by $66.7 billion net outflows, resulting in 2.9 percent of total AUM growth between January and September.
When breaking the hedge fund industry down by strategy, Preqin’s data reveals that equity and macro strategy funds overcame net investor redemptions to see their AUM grow in the first three quarters of the year, while credit, relative value and multi-strategy funds all saw their total assets fall.
Of those reviewed by Preqin, smaller hedge funds, categorised as under $100 million, saw less outflows in Q3 (38 percent) than their larger counterparts (49 percent) and also saw more inflows (45 percent) than funds over $100 million (37 percent).
By region, North American funds were marginally more likely to see outflows than inflows (42 percent to 40 percent respectively).
All other regions saw more inflows than outflows.
Amy Bensted, head of hedge fund products at Preqin, said: “2016 has been a difficult year for the hedge fund industry; ongoing investor concerns about the performance of the asset class and the fees that funds charge have made both raising and retaining investor capital increasingly challenging for hedge fund managers.”
“As a result, outflows have increased over each of the three quarters in 2016 to date, and nearly every leading strategy has seen net redemptions from investors.”
“However, strong industry performance and the resulting growth in total industry assets under management strike a more positive note. The Preqin All-Strategies Hedge Fund benchmark has added positive returns throughout Q2 and Q3, and the industry has enjoyed its largest performance gain since 2012 to 2013.”
“Therefore, while investors may continue to pull capital out of hedge funds in the short term, if managers can continue this run of strong returns, particularly in unpredictable markets, and prove their role in institutional portfolios, then we may see inflows return to the industry in 2017.”
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