Tuesday, January 31, 2023

HF outflows continue in October, multi-strats in vogue



The fourth quarter began with outsized hedge fund outflows, although most multi-strategy funds attracted cash in October.

Investors removed approximately $14bn from hedge funds in October on a net basis, the highest figure for the month in six years, according to eVestment.

Industry outflows outpaced inflows by $74.7bn in the first ten months, meaning last year’s net inflow ($13.9bn) is unlikely to be repeated. The sector is on track to have bigger net outflows than the first year of the pandemic ($59.3bn) when an investor “dash-for-cash” led to hedge fund redemptions.

Industry intel suggests that effect has likely been even bigger this year amid war in Ukraine, double-digit inflation and volatile episodes, from the UK’s bond market in October to the collapse last month of crypto broker FTX.

Equity market-neutral was the only primary strategy to have a net inflow ($0.7bn). Multi-strategy had a slim net outflow of $0.5bn but is by some way the most popular, with net inflows of $13.7bn in the first ten months.

Multi-strategy flows were mostly performance driven, with the average 2022 return for the ten funds with the largest net outflows in October is -5.2%, while the average for those with the largest inflows was 8%.

Just 40% of multi-strategy products had net outflows in October. Last year multi-strategy had a $23.2bn net inflow but 2020 saw a $2.4bn net outflow.