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Hedge Fund Industry Loses Almost 10% Of Assets In First Quarter

Industry tracker Preqin has published new data showing that the hedge fund industry lost 9.4% of total assets in the first quarter of 2020. The industry now manages $3.31tn (as of 31 March 2020) according to the firm, the first time AUM has fallen below $3.5tn since Q4 2018. Poor performance accounted for the majority ($296.1bn) of lost assets, with investor redemptions totalling $47.7bn. This brings hedge funds to eight consecutive quarters of outflows.

Almost all top-level strategies suffered outflows in Q1. Macro strategies and CTAs recorded the greatest capital withdrawals, at $10.8bn and $10.7bn respectively. Event driven strategies followed closely behind: investor redemptions totaled $8.3bn for the quarter following a poor return of -16.72%. The strategy lost just over a fifth (21%) of all assets as AUM dropped to $152.7bn.

Only niche strategies recorded inflows, with 54% of such funds experiencing inflows; though at $0.3bn, these gains were incremental. Managers based in the Rest of the World region endured a very tough first quarter of 2020. Following significant volatility and poor performance, investors withdrew $12.6bn. Subsequently, AUM dropped to $20.8bn – marking a 44% fall since the end of 2019. North America was the only top-level region to record net inflows, at $25.4bn.

Among hedge funds that returned +5.00% or more in H2 2019, 35% recorded inflows in Q1 2020. This trend is similar over a three-year timeframe; any funds able to navigate the COVID-19-induced market disruption to produce a positive return are likely to build a strong track record that may help secure future investments.


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