Disappointing returns in 2015 have discouraged investors from committing new capital into hedge funds in 2016, according to eVestment.
February 2016 experienced just $4.4 billion in new investments into hedge funds, the data provider reported, falling short of an average of $22.6 billion of net new capital over the past six Februaries.
This February’s inflows also fell well below the previous worst February during that six-year period: $12.1 billion in 2010.
“February has historically been a month of elevated inflows for the industry,” the report said. “The dramatically reduced new investment into hedge funds this February reflects investor dissatisfaction with 2015 returns.”
“The dramatically reduced new investment into hedge funds this February reflects investor dissatisfaction with 2015 returns.”The performance decline of $24.5 billion for the month in addition to the low levels of inflows brought down total hedge fund assets to $2.946 trillion, eVestment continued. This was the third consecutive month in which industry assets had fallen.
However, hedge funds that were able to post positive returns in 2015 were rewarded new investor capital in 2016. In the first two months of the year, investors committed nearly $14 billion in allocations to funds that reported gains of 5% or better last year, eVestment found.
In contrast, $28 billion was redeemed in the same time period from funds with negative performance in 2015.
Investors were bright on commodity strategies and fixed-income/credit-focused hedge funds, allocating $1.8 billion and $2.5 billion, respectively, in February.
Managed futures funds also began to win over investors’ interest by gaining $3.61 billion in inflows, eVestment found, ending three consecutive months of redemptions.
Macro funds were the “biggest losers” in February, losing $2.78 billion for the month.
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