More Than $11 Billion Exits Hedge Funds in August

Net investment flow into hedge funds was negative $11.66 billion in August, according to a recent report from Nasdaq’s eVestment. This marks the third consecutive month of negative net flows for the hedge fund industry. Industrywide, $44.93 billion has been redeemed from hedge funds this year, which replicates a recent pattern. In 2016, 2018, 2019 and 2020, the average annual outflow was $77 billion, leaving 2022 on pace with those years. Historically, the second half of the year tends to be negative for hedge fund flows, with December having the greatest number of redemptions in most calendar years.  

Long/short equity, credit and macro-based hedge fund strategies have seen continued redemption pressure this year, which remained in August. Macro-based strategy saw the largest monthly outflows, with $3.68 billion of investor money leaving, followed by long/short equity funds, which saw outflows of $3.03 billion. 

Long/short equity funds have had particularly high redemptions. So far this year, the long/short hedge-funds have lost $25.06 billion to redemptions. Over 60% of funds in this strategy segment have lost assets this year, the eVestment data show. Directional credit funds ranked second, with redemptions of $21.23 billion.  

Managed future funds, which have been the best-performing hedge fund strategy, returning 9.97% year-to-date in 2022, also saw negative investment flows in August, as performance in the strategy has cooled off in recent months.  

The only category to see net inflows in the month was multistrategy funds. The data show that investors this year lack conviction toward any single hedge fund strategy and prefer to access a diversified set of strategies with a single allocation.   

Despite the trend of outflows in recent years, the hedge fund sector still holds $3.49 trillion in assets after strong performances—with average annual returns of 9.29% in 2019, 2020 and 2021.