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Hedge fund investors flee as performance tanks

A total $22.5 billion was pulled from hedge funds in the final quarter of 2018

Hedge fund investors flee as performance tanks

Hedge funds experienced their biggest outflows in two years in the last quarter of 2018, amid choppy markets and several large wind-ups.

A total $22.5 billion (£17.5 billion), or around 0.7% of total assets, was redeemed in the period, according to data house Hedge Fund Research.

The firm’s HFRI Fund Weighted Composite (FWC) index fell 5.76% in the quarter, equivalent to a $115 billion capital loss.

Hedge Fund Research president Kenneth J. Heinz said: ‘Hedge fund outflows in 4Q were driven by several factors, most notably investor reaction to steep losses in traditional asset investments and the sharp spike in equity market volatility leading to redemptions.'

Outflows for the full year stood at $34 billion, or roughly 1% of industry capital.

Outflows mainly originated with funds which closed and returned cash, while roughly two dozen firms lost more than $500 million in outflows.

Equity hedge funds saw the biggest falls in the period, as investors pulled an estimated $16.8 billion. Assets in the subsector fell to $871.8 billion, though technology/healthcare and quantitative directional sub-strategies experienced small inflows.

Macro strategies experienced redemptions of $6.6 billion, while event-driven funds received $6.4 billion in inflows.

According to a study from HSBC's annual investment group published last week, only 16 out of 450 hedge funds delivered positive returns before fees last year – one of which was Crispin Odey's Odey European.

Earlier in January The Financial Conduct Authority (FCA) said it was considering whether to issue guidance to hedge funds over the use of private polling data ahead of major political events.

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Crispin Odey
Crispin Odey Average Total Return:
15.89%
198/209 in Equity - Europe (Performance over 3 years)
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