Statistics
Hedge Funds Made Solid Returns Last Year - But Redemptions Accelerated
Hedge funds had one of their more respectable years for performance during 2016 but clients pulled out funds at a quickening pace during 2016.
A seeming paradox has come to light in data about the world’s
hedge fund sector – the industry clocked up solid returns but the
pace of redemptions accelerated over the same period last
year.
According to Preqin,
the research firm, funds returned an average of 7.4 per cent
during 2016. Outflows, meanwhile, totalled $110 billion, with the
rate increasing as the year went by. In the first quarter, there
were $14 billion of outflows, rising to $43 billion in the final
three months of last year.
Every major strategy experienced outflows, with one standout
exception - commodity trading advisors. CTAs logged net inflows
of $26 billion, even though performance was lacklustre, Preqin
said.
During the last year, total returns on the MSCI World Index of
developed countries’ stocks, for example, were 7.51 per cent
(capital growth plus reinvested dividends, as measured in
dollars).
It is possible that redemptions were prompted by frustration
after years of lacklustre gains, even though 2016 represented
something of a bounceback by the sector. According to a recent
report from Chicago-headquartered Hedge Fund Research, the
global hedge fund industry held $3.02 trillion of assets at the
end of 2016, rising $46.8 billion in the final three months of
the year, the second straight quarterly record for sector
capital. Total capital in the sector rose by $121 billion in
2016, HFR said.
Preqin said asset flows in general were linked to inflows and
outflows, despite the pattern of recent redemptions.
“There is a clear link between past performance and recent asset
flows, with the best performing funds in 2015 and H1 2016 being
the most likely to see net inflows in Q4 2016,” the organisation
said.
Funds pursuing an equities strategy were the only sector to see
net outflows in every quarter of 2016. Equities strategies ($50
billion), credit strategies ($28 billion), relative value
strategies ($25 billion) and multi-strategy ($23 billion) funds
accounted for the majority of 2016 outflows.
