Hedge fund industry assets fell 3.2%, or $95 billion, to $2.873 trillion during the three months ended Sept. 30, the largest quarter-to-quarter drop since the fourth quarter of 2008, new data from Hedge Fund Research showed.
By comparison, hedge fund industry assets fell a precipitous 18.3%, or $315 billion, to $1.407 trillion in the quarter ended Dec. 31, 2008, according to asset flow numbers released by HFR on Tuesday.
Industry performance losses across all hedge fund strategies totaled $100.7 billion in the three months ended Sept. 30, offset by net inflows of $5.6 billion.
Assets managed in hedge funds of funds, a subset of HFR's total hedge fund universe, dropped slightly less than those of the overall industry, with a 2.9% drop to $660 billion during the third quarter. The decline in aggregate hedge funds-of-funds assets as of Sept. 30 was due to net outflows of $3.9 billion and investment losses of $16 billion, an HFR analysis showed.
By strategy, event-driven hedge funds experienced both the highest net inflows of $5.4 billion and the largest investment losses of $44.5 billion. Relative-value hedge fund approaches attracted net inflows of $2.9 billion and suffered investment losses of $13.8 billion, followed by equity hedge strategies (net inflows, $2.4 billion; investment losses, $40.7 billion); and macro strategies (net outflows, $5.1 billion; investment losses, $1.6 billion).
HFR analysts noted that in aggregate, the industry's largest hedge fund companies, managing at least $5 billion, experienced net outflows of $300 million. By contrast, midsize hedge fund firms managing between $1 billion and $5 billion had collective net inflows of $3.6 billion, while firms managing less than $1 billion recorded net inflows of $2.4 billion.
HFR researchers said that by number, the tier of the largest hedge funds represented 6% of all hedge funds, but managed about 69% of total industry assets as of Sept. 30.
“Investors expanded allocations to small- and midsize firms in (the third quarter), reversing a trend of steadily increasing the capital concentration into the industry's largest firms,” said Kenneth J. Heinz, HFR's president, in a news release accompanying the data.