Hedge Funds Lose $158B In 2008

Mar 3 2009 | 12:58pm ET

The fourth quarter of 2008 saw the largest net hedge fund outflows since 1994, according to a new Lipper Tass report. Outflows rose 689% quarter on quarter to a record US$146.95 billion, confirming the trend started in third quarter 2008.

For all of 2008 net flows to hedge funds amounted to an outflow of US$158.91 billion—an amount more than fourfold the sum of any negative quarterly money flows to the industry since first quarter 1994.

The fourth quarter outflows, combined with the overall broad hedge fund index performance of a loss of 10.21% over the same quarter, produced a decrease in global hedge fund assets from US$1.59 trillion at the end of September to US$1.29 trillion as of the end of December, according to Lipper Tass. Cumulative net outflows suffered by all hedge fund substrategies in 2008 accounted for 11.43% of beginning of year assets, up from 0.86% recorded for the first three quarters.

All hedge fund sub-strategies posted negative money flows in the fourth quarter as the industry all at once faced the collapse of global equity markets, a rise in volatility to record highs, liquidity issues, and the failure of a number of key institutions.

In U.S.-dollar terms, the largest outflows were experienced by long/short equity at US$42.52 billion, managed futures at US$23.95 billion, event-driven at US$22.27 billion, and multi-strategy at US$16.64 billion. Combined outflows across these strategies amounted to US$105.39 billion, or 72% of the overall money flows in the quarter, compared to US$14.61 billion of outflows across the same strategies in the third quarter.

Of the four substrategies posting the largest negative outflows in the fourth quarter, only managed futures had recorded positive inflows for third quarter 2008 (US$1.34 billion).


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