Citi released its report on hedge fund activity for October highlighting flows, performance, leverage and short activity over the month. In a change of direction from September, both flows and performance were negative in October. Investors pulled more than $14 billion out of hedge funds in October, while aggregate performance of funds fell in the -0.50% to 0.60% range.
Citi’s highlights from the report are as follows:
Hedge Fund Performance and Flows
- Composite hedge fund performance, equal-weighted across funds, ended October in negative territory with returns ranging from -0.61% to -0.48% pivoting from the performance gains from September.
- Year to date broad based hedge fund index returns are firmly in positive territory, coming in between +1.39% to +3.57%.
- October proved to be a challenging month for Event Driven strategies returning -0.11%, Global Macro -0.55%, and Equity Long / Short -0.63%.
- Fixed Income Arbitrage was the only strategy with positive returns finishing Oct-16 up +0.46%.
- Global hedge fund industry assets fell in October by -$16.8 billion attributed to both broad based performance losses and net investor outflows.
- Net investor outflows of -$14.2 billion in October marks the sixth period of net outflows this year and are the largest since +$25 billion in Jul-16.
- YTD investor outflows now stand at -$74.3 billion compared to +$88 billion of inflows during the same period in 2015.
- Across the subset of hedge funds reporting performance and AUM, the monthly median performance for large single funds (>$750 million) was -0.3%, medium single funds ($351 – $750 million) -0.5% and small single funds (<$350 million) -0.7%.
- Liquidity terms continued consistent patterns from previous periods. The universe of funds that only require 30 days or less for redemption notices stood at 67%, consistent with trends throughout the previous 30 months. Across the entire subset of reporting funds, the majority (56%) required no lockup (45%) or less than 1 year lock up (11%).
Leverage and Shorts Activity
- On a global basis, gross leverage remained fairly constant at 2.71x in October versus 2.73x in September.
- Investment strategies with the highest use of leverage were: Market Neutral at 4.8x , Multi Strategy 4.4x, Global Macro at 4.5x
- Consumer Discretionary and Information Technology sectors which accounted for 38.2% of short executions in October while Consumer Discretionary and Information Technology sectors accounted for 37.2% of short covers in October.
For more information, or to request a full copy of the report, visit: Citi Business Advisory Group