Hedge Fund Outflows Continue, Small Funds Beat Big

21 Dec

Hedge Fund Outflows Continue, Small Funds Beat Big

Event-driven hedge funds were one of several bright spots in hedge fund asset flow trends in November as investors catch on to these funds’ strong performance, according to the just-released eVestment November 2016 Hedge Fund Asset Flows Report. After enduring negative investor sentiment for nearly two years, yet outperforming most other strategies during 2016, event-driven funds pulled in just over $1 billion in new funds, which barely however makes a dent in the -$37.02 billion in fund flows these funds have seen year-to-date.

Overall, hedge funds saw investors redeem about $2.2 billion from hedge funds in November, bringing overall industry AUM down to $3.024 trillion. Year-to-date, $83.1 billion has been removed from the industry and 2016 may shape up to be a negative year for the industry, the first such year since 2009.

Despite overall outflows in November, more than half of reporting hedge funds had positive flows, a function of larger funds being net asset losers while smaller funds had aggregate net inflows.

A few other interesting points from the report include:

  • We noted in the prior report that the outlook for managed futures fund flows was not positive, given the amount of inflows in the last 1.5 years contrasted by the level of performance declines. Seemingly on cue, redemptions in November were the universe’s largest in nearly three years.
  • Commodity fund flows are hanging in the balance of uncertain investor sentiment. Flows were near flat, but positive, in November after two months of redemptions in September and October. The segment had been one of the few in the industry investors had been generally in favor of until losses re-emerged in July.
  • There continues to be a lack of broad positive sentiment toward funds focusing on opportunities in China. Investor flows for China-focused funds were actually positive in November, but only slightly so ($4.2 million net allocated), and the majority of products experienced redemptions.

To download a full copy of the report, please click here.