Hedge Fund Capital Grows, But Q4 Saw First Net Outflow Since 2011 - HFR

Tom Burroughes

21 January 2016

The total capital of hedge funds stood at $2.9 trillion at the end of last year, a rise of $22.8 billion over the prior quarter. However, the figure masked a net outflow of $1.52 billion in the final three months of last year, the first time there has been such a pullout since the final quarter of 2011, figures show.

Data from Chicago-headquartered hedge funds led strategy inflows for the fourth quarter, receiving $2.5 billion in new capital. This brought macro strategies to a narrow inflow of $900 million for 2015, increasing total macro capital to $550 billion.

The HFRI Macro (Total) Index fell 1.15 per cent in 2015, though larger macro funds demonstrated strong performance relative to smaller funds.

Equity hedge strategies took in $25.8 billion for the full year, including $2.0 billion in Q4, bringing total equity hedge capital to $829 billion. Both event driven and fixed income-based relative value arbitrage (RVA) strategies experienced capital outflows in 4Q, but inflows for the full year.

“The global hedge fund industry expanded in 2015 as global financial markets entered into an important and uncertain transitional macroeconomic environment, resulting in acceleration of asset volatility and wide performance dispersion across hedge fund strategies,” Heinz said.

“While financial market dislocations have contributed to mixed performance across the most directional energy- and credit-sensitive strategies, many larger hedge fund firms had positioned conservatively for the reversal of the equity beta trend, resulting in positive cap-weighted strategy performance. With clear acceleration of these transitional trends into early 2016, it is likely that investors will continue to exhibit strong preference for low beta exposures and leading firms into 2016.”