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eVestment: Investors Redeemed $100bn From Hedge Funds In 2019

Industry tracker eVestment's hedge fund asset flows report shows that investors redeemed almost $100bn last year, but performance gains pushed overall industry AUM to $3.3trn, a 4% gain for the year.

Among primary strategies tracked by eVestment, Long/Short Equity funds were the big asset losers in 2019, with investors pulling -$45.61bn from these strategies. In December, investors pulled -$3.90bn from Long/Short Equity strategies. Multi Strategy funds saw -$21.19 billion pulled by investors in 2019 (with -$7.68 billion pulled in December), good for second place on the 'largest redemptions' list. Macro funds were big asset winners among primary strategies in December, with investors adding +$3.87 billion, but these funds are still down -$18.42 billion for the year.

December outflows have been the norm rather than the exception since 2008, however. Only once since the end of 2008 have investors flows been net positive to end a year, and even then (2010) the net inflow during the month was miniscule. The average year-end redemption over the last eleven years has been nearly $18 billion, which would make 2019’s December outflows better than average.

Hedge funds have been on the receiving end of redemptions in three of the previous four years, according to eVestment. 2018 saw outflows of $37bn and 2016 $112bn. 2017 was the outlier with a net inflow of $27.72bn.

eVestment believes that the money withdrawn from hedge funds is being, in part, diverted towards illiquid alternative investment products like private equity funds and real assets. A report from eVestment last August detailing the asset allocations of 163 public pension funds in the United States shows that, in the U.S. specifically, private equity allocations were below target at 8.15% vs. a target of 8.72%, and real assets a significant -145bps below target, with a current allocation of 11.83% vs a target of 13.29%.

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