Record Redemptions, Poor Performance Sap Hedge Fund Assets

Jan 21 2009 | 4:24pm ET

Two years’ worth of growth in the hedge fund industry was obliterated last year as investors fled, saddling the already hard-hit asset class with the biggest outflow in history.

Hedge funds managed just $1.4 trillion on New Years Day, a 27% decline from the middle of last year, when the industry peaked at $1.93 trillion, Hedge Fund Research reports. Of the vanished $525 billion, record investor redemptions in the fourth quarter were responsible for $152 billion of the lost assets. All told, 2008 outflows totaled $155 billion, only the second time ever that the hedge fund industry has contracted since at least 1990.

“Investor risk aversion remained at historically extreme levels through year-end, even as implied and realized asset volatility moderated,” Kenneth Heinz, president of HFR, said.

The top 10% of hedge funds in the HFRI index returned an average of 40% last year, while the bottom 10% lost an average of 62%. But investors did not discriminate in running for the exits. Macro funds were one of the few to enjoy a relatively strong year, but investors still pulled $31 billion from the strategy. Short-biased funds and systematic diversified strategies posted double-digit returns, but still investors took their money and went home.


In Depth

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.