Hedge Fund Investors are Rushing for the Exits in 2019

August 22, 2019 | Hedge Funds
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Compared to 2018, investors have already pulled $ 20 billion more out of hedge funds in the first seven months of this year

Hedge fund investors are walking away in droves.

In all of 2018, investors had withdrawn $ 37.2 billion from hedge funds. However, in the current year investor outflows already aggregate $ 55.9 billion, including $ 8.4 billion in July itself.

The trend could accelerate in the months ahead.

Some funds escaped withdrawals

Data from eVestment showed that about 37% of hedge funds were spared the redemption bloodbath, and instead reported net inflows during the period to July. Of these, the best performers were the category ‘event-driven,’ which raked in $10.3 billion.

The category singled out for the most withdrawal punishment was ‘long-short,’ which lost $25.5 billion in investor capital.

This year’s redemptions are therefore the worst since those witnessed in 2016.

Hedge fund investors fret over fees and weak performance

The hedge fund industry is reeling from the rejection by investors who are fed up with their high fees. Under pressure from investors, funds have long-since junked the time-honored fee structure of two-and-twenty. Those hedge funds unable to cope have shut shop. As a result, in each of the last three years, fund closures have exceeded the number of new fund launches.

Their lackluster performance in 2018 is another factor.

“Many investors still may be stinging from the overall industry performance of -5.08% in 2018, causing the industry to suffer from asset outflows based on decisions made by investors months ago following that dismal year,” said Evestment.

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