Hedge Funds See Biggest Outflow Since Financial Crisis

  • Global hedge fund outflow highest since Q2 2009
  • AUM declines below $3 trillion for first time since 2016
  • Outflows concentrated in firms managing over $5 billion

Investors pulled $33 billion out of hedge funds globally as markets spiraled down in the first quarter, according to Hedge Fund Research.

It’s the largest quarterly outflow since Q2 2009 ($42 billion) and the fourth largest in industry history, with the three largest outflows occurring from Q4 2008 through Q2 2009. An estimated $20.6 billion (62.4%) was redeemed from large firms managing greater than $5 billion. Firms managing between $1 and $5 billion experienced outflows of $11.0 billion, while investors redeemed $1.6 billion from firms managing less than $1 billion.

With performance-based asset losses of $333 billion seen during this period, hedge fund capital declined a total of $366 billion from a record high in Q4 2019 to reach $2.96 trillion. This marks the first time it has fallen below $3 trillion since Q3 2016.

“Investors reacted to the unprecedented surge in volatility and uncertainty driven by the global coronavirus pandemic with a historic collapse in investor risk tolerance and the largest capital redemption from the hedge fund industry since post-Financial Crisis,” stated Kenneth J. Heinz, President of HFR. “While volatility and market dynamics remain fluid through early 2Q, dislocations created by indiscriminate selling from traditional asset management have created significant opportunities for specialized long/short funds, which are likely to benefit both forward-looking funds and institutional investors in coming quarters.”

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