Event-driven managers are taking it on the chin, racking up net outflows of $38 billion so far this year, the largest among all hedge fund strategy categories.
In fact, assets redeemed from event-driven funds through Oct. 31 already are double the $19.4 billion of net outflows the category saw from all of 2015 and account for almost half of the $77 billion of industry-wide redemptions year-to-date, data from eVestment LLC show.
At issue: investors' dissatisfaction with the 2015 and 2016 performance of the activist faction within the event-driven segment of the market, sources said.
Managers of more traditional, fundamental event-driven strategies — credit arbitrage, merger arbitrage, special situations and distressed/restructuring — are faring much better in general, reporting relatively stable assets under management, increased interest and investment from asset owners globally.
“Event-driven hedge fund strategies tend to be painted with one big brush, but parts of the industry have been doing well and others have not,” confirmed Raymond C. Nolte, chief investment officer of SkyBridge Capital Management II LLC, New York.
“The bulk of the assets redeemed from event-driven strategies have been from the mega-event managers,” SkyBridge's Mr. Nolte said, noting “activist funds went from feast to famine and this tends to form the narrative for the whole category, which is not really accurate.”
Among the activist managers with large drops in AUM are a handful of well-known firms such as JANA Partners LLC, with a 37% decline in assets to $7.4 billion for the year ended June 30; Pershing Square Capital Management LP, with an AUM drop of 37.4% to $11.6 billion between June 30, 2015 and Oct. 31; and Third Point LLC, with a 10.1% decline to $16 billion between June 30, 2015 and Feb. 29, according to Pensions & Investments' analysis of company-provided and publicly available information.
Representatives from these activist managers declined to comment or did not respond to requests for comment.