eVestment: Hedge Fund Redemptions Total $5.2B in January 2017

Feb 24 2017 | 9:51pm ET

Hedge fund investors continued heading for the exits in January despite buoyant markets and generally positive returns, according to the latest data from eVestment.

Investors pulled another $5.2 billion from hedge funds in January 2017, a fraction of the net $19.3 billion they yanked from hedge funds in January of last year. Coming off 2016, which ranks as one of the most difficult annual periods of redemption pressure for the industry since the financial crisis, the outflow tally may actually be a sign investors have entered the new year with a more positive view, eVestment said. 

Nonetheless, despite the negative flows, the withdrawals were centralized within products that underperformed in 2016, and there were many positive metrics at the fund level. 

The data is included in eVestment’s January 2017 Hedge Fund Asset Flows Report. Overall hedge fund industry AUM in January stood at $3.033 trillion, the company said, and 49% of hedge fund managers reported positive inflows during the past month.

Highlights from the report: 

  • Hedge funds had their fifth consecutive monthly outflows in January, the longest streak since six months of outflows ending December 2011.
  • The largest redemptions in January came from managed futures funds, with flows of -$3.67 billion. This brings managed futures flows for the past three months to -$13.19 billion.
  • Event driven and relative value credit funds also saw big outflows in January 2017, with flows of -$2.81 billion and -$2.69 billion respectively. Flows to Event driven and fixed income/credit funds were negative to begin the year, but H2 2016 returns may shift sentiment to positive. 

  • Commodity managers had the lowest proportion of managers with outflows to start the year. 
  • Multi-strategy funds had the biggest inflows among primary hedge fund strategies, with +$3.80 billion, bringing their three-month total to +$4.31 billion.
  • A slightly negative flow of -$0.80 billion among emerging markets hedge funds in January ended a two-month period of inflows to those funds.
  • There are positive signs at the fund level, including the 49% of managers that had inflows during the month, solidly above the prior 12- month average. Over 17% of all funds and over 20% of large funds had meaningful inflows (>2% of AUM), both also well above their prior 12-month averages. Lastly, redemptions were noticeably focused within strategies that lost money in 2016 - a good omen for 2017.  

“2016 was a difficult year for the industry,” said eVestment Global Head of Research Peter Laurelli in the report. “But with 2016 performance coming in strong, [our] outlook for 2017 asset flows hinges on two main influences. First, the wave, or lack thereof, of inflows from institutional portfolios as a result of portfolio shifts in exposure to hedge funds. This had been a primary driver of inflows in 2013-2015, and faded in 2016. And the second influence: the impact of prior year’s performance on the withdrawal, allocation or redistribution of assets around the industry.”

“Last year’s negative environment was the result of the first influence being near flat, and prior year (2015) returns being negative. While it is not clear for 2017 if the first influence will shift to positive, it is clear that the second influence is nowhere near as negative as it was in 2016,” he added. 

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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