According to the June 2019 eVestment Hedge Fund Asset Flows Report, global investors pulled another $16.43 billion from hedge funds in June, pushing the YTD redemptions for all hedge funds to $44.61 bln.

June 2019 Fund Flows

According to eVestment, investors redeemed an estimated $16.43 billion from all hedge funds in June 2019. During the month, event driven funds were the only strategy to experience any meaningful inflows, with $1.89 bln in inflows seen. Convertible arbitrage funds experienced meager inflows of $.30 bln during June as a handful of products attracted new capital.

Investors withdrew $5.71 bln from long/short equity funds during June, while they redeemed $3.74 bln and $2.88 bln from Directional Credit and Relative Value Credit funds, respectively. Investors also withdrew $2.2 bln from multi-strategy funds during the month.

During June, 57% of managers reported net redemptions during the month. This level is higher than the average of 53% seen for fund managers since the beginning of 2016.

2nd Qtr Fund Flows

Hedge fund redemptions in the Second Quarter 2019 were estimated at $27.82 billion, the industry’s fifth consecutive quarter with net outflows. During the last ten years there have been net outflows in the second quarter of the year five times (2009, 2012, 2016, 2018, 2019). Redemption levels in Q2 2019 were the highest of any of these years by more than two times (2016 outflows were $13.49 billion).

Event Driven funds saw inflows during Q2 of $8.29 bln, while MBS strategies and Convertible Arbitrage funds experienced capital inflows of $1.55 bln and $0.41 bln, respectively during the period.

During Q2 long/short equity funds experienced outflows of $13.12 bln, while macro, multi-strategy and managed futures funds saw outflows of $7.82 bln, $3.76 bln and $3.74 bln, respectively.

Year-to-date Fund Flows

Hedge fund redemptions on a 2019 year-to-date basis total $44.61 bln, already eclipsing the $37.18 withdrawal total seen in all of 2018. Of this total, $23.68 bln come from multi-asset funds, while $11.30 bln and $10.5 bln come from equity and fixed-income/credit funds. Commodities funds have posted modest inflows on a year-to-date basis of $0.34 bln. For the year, 63% of reporting managers have experienced net asset outflows for their funds.

Event Driven funds saw inflows of $10.64 bln on a YTD basis, while MBS strategies and Convertible Arbitrage funds experienced capital inflows of $3.05 bln and $0.94 bln, respectively during the same period.

During the first six months of this year, long/short equity funds experienced outflows of $23.16 bln, while macro and managed futures funds saw outflows of $12.48 bln, $9.78 bln, respectively.

Our Take

During Q2 2019, hedge funds experienced growing redemption pressures, marking the worst asset outflows seen in a second quarter for at least 15 years. In fact, very few fund strategies escaped the carnage, with event driven and MBS strategies being the most successful.

The poor performance of hedge funds so far this year is due, in large part, to the relative underperformance hedge funds have been able to deliver when compared to the rest of the market. During the first six months of 2019, the eVestment Hedge Fund Aggregate posted a 6.96% gain. During the same period the MSCI World / Citi WGBI indices rose 11.23%, while the S&P 500 index surged 18.54%.

Of course, not all hedge funds have suffered so far this year. In fact, hedge funds that have posted modest performance (>5%), but that were in excess of $1.0 bln in AUM actually saw significant net inflows during the year compared to smaller funds, or funds that didn’t perform as well. Clearly, this reflects the benefits of scale and the reality of the large getting larger. Of course, this is not great news for the many smaller hedge funds that struggled with performance so far in 2019. It also is not great news for the research and data firms that rely on hedge fund demand to stay in business.