eVestment: Redemptions Continue in November as Investors Pull $2.2B

Dec 22 2016 | 11:52pm ET

Investors continued to redeem their hedge fund investments in November, pulling an estimated net $2.2 billion in November and pushing total net redemptions year-to-date up to $83.1 billion, according to eVestment’s latest Asset Flows Report. Total industry AUM is now down to $3.024 trillion.

November’s outflow was the third consecutive month of redemptions, the fifth in the last six months, and the seventh in 2016, the company reported. With only December left to tally, eVestment predicts annual flows will likely be negative in 2016 for the first time since 2009, and only the third time on record. The elevated redemption pressure stems primarily from concerns about performance and fees that have plagued investor sentiment towards hedge funds this year, eVestment said.

Key highlights from eVestment’s report:

  • Despite outflows in November, more than half of reporting funds had inflows during the month. It is somewhat rare for the industry to have the majority of funds receiving net new money, while overall experiencing net outflows. The overall reduction is a sign of outflows being concentrated, and larger funds were net losers of assets in November while smaller funds had aggregate net inflows. 
  • While it is positive to see the majority of funds gaining new assets, November has typically been a lighter month for net flows for the industry. The average net inflow in November 2014 and 2015 was lower than any other month during the two-year span. Conversely, December has historically been a very large month for flows, particularly for redemptions, even during years when overall flows for the industry were significantly positive. Given the historically negative year, December’s flow data could be ugly.
  • Managed futures redemptions in November were the universe’s largest in nearly three years, since $5.5 billion was removed in March 2014. With performance declines in each of the last four months, and seven of the last nine months, the recent shift of sentiment to negative by investors should not be a surprise. 
  • After enduring negative investor sentiment for nearly two years, yet outperforming most other strategies in 2016, event driven funds had their largest monthly net inflow in November since August 2015 - just over $1 billion in new funds.
  • Multi-strategy funds, which led the industry for inflows in each of the prior three years, have booked mixed returns in Q4, and despite decent asset-weighted returns in November, and industry leading inflows during the month, the environment multi-strategy funds have created leaves eVestment looking toward 2017 with uncertainty. 
  • Macro hedge funds have continued to produce positive asset-weighted returns, yet also continue to see net outflows. November was the ninth consecutive month of positive asset-weighted returns, and the sixth consecutive month (and 11th in last 13) of net outflows. One cause appears to be a rotation of assets within firms driven by 2015 performance, eVestment said.
  • After two months of inflows, the redemptions within emerging market funds that arose in October continued into November, putting the turnaround of interest in EM exposure on hold. Meanwhile, Europe as both an investment region and firm domicile continues to face pressure from investor redemptions.
  • Whether the questionable regulatory environment following BREXIT, or the large losses from prominent managers are to blame, one thing has been clear; investors are expressing their dissatisfaction with Europe as both an investment region (seven consecutive months of redemptions totaling $11.6 billion), and location of operations (seven consecutive months of redemptions totaling $26.9 billion).
  • There continues to be a lack of broad positive sentiment toward funds focusing on opportunities in China. Investor flows for China-focused funds were only slightly positive in November, at $4.2 million net, and the majority of products experienced redemptions.

Atlanta-based eVestment was founded in 2000 by Jim Minnick, Matt Crisp and Heath Wilson. The company boasts one of the most comprehensive global databases of traditional and alternative strategies and provides institutional investment data intelligence and analytic solutions to clients worldwide.

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