Hedge funds show record outflows
21 August 2018 New York
Image: Shutterstock
Hedge funds have recorded quarterly outflows of $1.2 billion in Q1 this year, which ended the streak of five consecutive quarterly inflows, according to a Preqin report.
The positive performance has resulted in hedge fund assets under management to stand at a record high of $3.6 trillion as at the end of June this year.
According to Preqin, credit strategies attracted the greatest amount of capital, which amounted to $11 billion, driving its H1 2018 net asset flows to $19 billion.
Preqin also found that event-driven strategies recorded strong inflows, with net positive flows of $9.2 billion in Q2.
Meanwhile, only North America-based managers recorded net inflows, which attracted a combined net of $22 billion.
In contrast, European hedge funds experienced a second consecutive quarter of inflows, Preqin revealed.
Preqin also revealed that in Q2 this year, 51 percent of funds of $1 billion or more saw inflows, while 31 percent of funds of less than $100 million experienced inflows, which is an indication that investors are moving capital into the largest funds.
Amy Bensted, head of hedge funds at Preqin commented: “After a streak of five consecutive quarter of inflows, the hedge fund industry has recorded its first quarter of outflows since Q4 2016.”
“However, hedge fund assets under management have reached a record high of $3.61trillion driven by performance. Investors continue to put more money to work in credit strategies, following net outflows from these strategies in 2017 and 2016.”
She continued: “In Q2 these strategies attracted the greatest inflows, following inflows of nearly $8 billion in Q1.”
“In contrast, the appetite for commodity trading advisors (CTAs) appears to be faltering: outflows of $9.2 billion, coupled with a difficult performance environment, has led to CTA assets under management (AUM) declining slightly to $281 billion.”
“Investors appear to be shifting capital towards the largest funds. Approximately half of all funds with $500 million or more in AUM attracted positive flows in Q2 2018; in contrast, 55 percent of funds with less than $100 million in capital saw outflows.”
Bensted concluded: “This may suggest that investors are seeking the security of larger fund managers with the possibility for the outsized returns associated with smaller funds being less of a priority, particularly with the expectations of a market correction growing for many institutions.”
The positive performance has resulted in hedge fund assets under management to stand at a record high of $3.6 trillion as at the end of June this year.
According to Preqin, credit strategies attracted the greatest amount of capital, which amounted to $11 billion, driving its H1 2018 net asset flows to $19 billion.
Preqin also found that event-driven strategies recorded strong inflows, with net positive flows of $9.2 billion in Q2.
Meanwhile, only North America-based managers recorded net inflows, which attracted a combined net of $22 billion.
In contrast, European hedge funds experienced a second consecutive quarter of inflows, Preqin revealed.
Preqin also revealed that in Q2 this year, 51 percent of funds of $1 billion or more saw inflows, while 31 percent of funds of less than $100 million experienced inflows, which is an indication that investors are moving capital into the largest funds.
Amy Bensted, head of hedge funds at Preqin commented: “After a streak of five consecutive quarter of inflows, the hedge fund industry has recorded its first quarter of outflows since Q4 2016.”
“However, hedge fund assets under management have reached a record high of $3.61trillion driven by performance. Investors continue to put more money to work in credit strategies, following net outflows from these strategies in 2017 and 2016.”
She continued: “In Q2 these strategies attracted the greatest inflows, following inflows of nearly $8 billion in Q1.”
“In contrast, the appetite for commodity trading advisors (CTAs) appears to be faltering: outflows of $9.2 billion, coupled with a difficult performance environment, has led to CTA assets under management (AUM) declining slightly to $281 billion.”
“Investors appear to be shifting capital towards the largest funds. Approximately half of all funds with $500 million or more in AUM attracted positive flows in Q2 2018; in contrast, 55 percent of funds with less than $100 million in capital saw outflows.”
Bensted concluded: “This may suggest that investors are seeking the security of larger fund managers with the possibility for the outsized returns associated with smaller funds being less of a priority, particularly with the expectations of a market correction growing for many institutions.”
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