Hedge Funds Suffer Heaviest Net Outflow To Begin a Year Since 2016

Investors removed $14.3bn from hedge funds in January, the second largest net outflow to begin a year since 2009, according to new data from Nasdaq eVestment.

Long/short equity once again bore the brunt of the redemptions, with a net $6.42bn leaving these products in the first month of the year, continuing their run of bad form; the category also saw the largest net redemptions by dollars in 2021, 2022 and 2023.

It’s not all bad news, however, because Nasdaq eVestment says that the headline number doesn’t tell the full story.

“Looking back over this seven-year period of January’s data we see that outside the generally light flows indicated in the data, the proportions of products seeing net new money coming in has averaged around 50%. In January 2024 it was 42%, but there were other metrics that weren’t nearly as negative. For example, the proportion of products whose redemptions were greater than 2% of AUM was 24% and that level has been matched multiple times in the prior seven years and even exceeded in January 2019. Additionally, the % of products who lost greater than 5% of AUM was actually the lowest of any January since at least 2016. What’s making the January net outflow the largest since 2016 is the result of two factors, very few meaningful new allocations, which isn’t rare in January’s data, along with very few but large redemptions and a few smaller outflows,” it says in its report.

Despite the redemptions, overall industry assets increased, due to performance gains. $19.9bn was added to total assets under management in hedge fund world, which now stands at $3.515trn. Distressed ($0.81bn), convertible arbitrage ($0.12bn) and market neutral equity ($0.09bn) were the only three categories that delivered positive net asset flows to begin the year.