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Awaiting the Holiday-Season Miracle

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Stockholm (HedgeNordic) – Money continues to flood out of hedge funds, with investors redeeming about $5 billion from the industry during the month of October, according to eVestment. Net outflows from the industry have added up to reach $54.7 billion for the year, which compares with the $102.3 billion investors pulled from hedge funds in 2019.

“Barring a holiday-season miracle, overall hedge fund asset flows for 2020 will be negative too,” writes eVestment. According to eVestment, the hedge fund industry oversees $3.15 trillion in assets under management as of the end of October. Despite investors continuing to take money out of the industry, eVestment data shows that a large number of hedge funds, mainly those with consistent and strong performance, are attracting fresh capital.

“Barring a holiday-season miracle, overall hedge fund asset flows for 2020 will be negative too.”

All of the 15 hedge funds with the largest inflows for October delivered positive results in 2020, with the group advancing about 11 percent on average. Conversely, nine of the 15 funds with the largest outflows during the month produced negative results for the year. This group of funds lost about six percent on average in 2020. “This stat just about sums up the state of the industry in 2020,” writes eVestment.

“One theme which has defined the year for hedge fund flows in 2020 is that those who have been able to navigate a tumultuous set of market conditions have been rewarded, and those who have not are experiencing significant consequences,” says Peter Laurelli (pictured), eVestment’s Global Head of Research. “We’ve seen this play out across multiple strategies and persist over many months. For managers on both sides of the coin, 2020 seems to be producing career-defining moments.”

“One theme which has defined the year for hedge fund flows in 2020 is that those who have been able to navigate a tumultuous set of market conditions have been rewarded, and those who have not are experiencing significant consequences.”

According to eVestment’s Hedge Fund Asset Flows Report for October, the volume of asset movement in October reached the lowest level over the last 17 months. Among hedge fund vehicles with more than $1 billion under management, the proportion of funds enjoying inflows of more than two percent of assets under management stood at eight percent, the smallest proportion in over two years.

About 60 percent of the universe of long/short equity managers is dealing with net outflows in 2020, according to eVestment. Nine of the ten equity long/short funds with the largest volume of redemptions in 2020 are experiencing negative returns for the year. This group of ten funds delivered a negative return of 15 percent on average in 2020. On the other hand, nine of the ten equity long/short funds with the largest volume of inflows this year are enjoying positive returns. This group returned 15 percent on average in 2020. With $19.1 billion in net outflows for the year, macro hedge funds are on track to surpass last year’s level of redemptions and experience the worst year of outflows since at least 2005.

eVestment’s Hedge Fund Asset Flows Report for October 2020 can be found below:

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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