Investors Pull Another $25.2 Billion from Hedge Funds in July, YTD Flows Negative $55.9 Billion

Investors, continuing to react to challenging hedge fund returns in 2015 and earlier this year, removed an estimated $25.2 billion from hedge funds in July, bringing YTD net flows to negative $55.9 billion, according to eVestment’s just-released July 2016 Hedge Fund Asset Flows Report.

In terms of cumulative magnitude, the redemption pressures facing the hedge fund industry in the last two months are reminiscent of the second half of 2011, when in a four month span investors redeemed an estimated $42 billion. Unless these pressures recede, 2016 will be the third year on record with net annual outflows, and first since the outflows in 2008 and 2009, a result of the global financial crisis.

Several interesting points from the report, according to author Peter Laurelli, eVestment’s global head of research, include:

· Investor redemptions from the industry continue to be driven by mediocre performance. Funds producing losses in 2015 are by far the primary source of outflows throughout the year into July. Additionally, in both June and July, redemptions have accelerated from within funds producing losses in 2016.

· While aggregate industry flows were negative, many individual funds with strong performance saw positive flows. For instance, the 10 largest allocations in the last two months have gone to funds which have produced an average return of nearly 7% this year, and produced positive returns on average in 2015.

· Commodity funds are one segment which has consistently attracted new allocations in 2016, including both in June and July. Investor sentiment to commodity funds has been positive for the last 14 months, during which time investors have added an estimated $10.3 billion.

· The magnitude of redemptions from Asia-domiciled funds declined for the fourth consecutive month in July. Investors redeemed an estimated $840 million from the Asia-domiciled hedge fund industry.

· Money continued to come out of funds investing in China in July. The $209.1 million removed from reporting funds was above the level seen in June, but still far less than its highest level in March 2016.

To download a full copy of the report, please click here.