Redemptions at Hedge Funds Continue as Performance Increases Industry AUM to $2.982 Trillion

Investors redeemed an estimated net $4.60 billion from hedge funds in March, the fifth month in the last six in which redemptions outpaced allocations, according to eVestment’s just-released March and Q1 Hedge Fund Asset Flows Report. Performance gains during the month offset redemption pressure, however, helping to increase total hedge fund industry assets $29.59 billion in March to $2.982 trillion. For Q1 2016, investor inflows were negative, with net outflows of $14.35 billion.

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Some other interesting points from the latest hedge fund asset flows report, according to report author and eVestment Vice President of Research Peter Laurelli, include:

· Redemptions across the hedge fund industry are currently focused on funds that performed poorly in 2015. Investors withdrew a net of $15.94 billion in March from funds that produced losses in 2015. That brings YTD redemptions from funds that produced losses in 2015 to $43.35 billion.

· Investor interest in commodity funds continued to be positive for a seventh consecutive month in March. Inflows were not large, estimated at $80 million, but the universe’s inflows of $3.96 billion in Q1 2016 put it ahead of all other primary markets.

· Managed futures funds continue to see strong investor interest. Investors allocated $4.3 billion in March and the group leads all strategies in 2016. The group has not been able to maintain consistent returns over the last several months, but investors continue to see the space as a valuable alternative.

· Multi-strategy fund flows were positive again in March as the group rebounded from redemption pressure at the turn of the year. Much has been made of Q1 losses from certain large multi-strategy funds in 2016, though losses do not yet appear to be impacting flows.

· Redemptions from China-focused funds reporting to eVestment were $337.46 million in March. This marks the first spike of redemption pressure for the universe since losses and volatility emerged in H2 2015.

· Investors appear to be in a wait-and-see mode with regards to broad emerging market hedge fund exposure. Aggregate emerging market fund returns shifted positive in October 2015, but investors have not shown any sort of consensus to allocate en masse, as of yet. Redemptions were low in March, $220 million exited the EM universe, and there does not seem to be any sort of theme to the impact of size and returns driving performance.

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