The numbers are in: 2016 was a bad year for poor hedge fund performers as institutional investors expressed dissatisfaction by redeeming and redeploying assets with other managers.
Redemptions were up 82% in 2016 to a total of $10.3 billion, compared with $5.7 billion the prior year, showed analysis of the hedge fund and hedge fund-of-funds investment activity of asset owners as reported by Pensions & Investments throughout the year.
Hedge fund redemptions in 2016 totaled $5.4 billion, up 140% from the prior year; asset owners pulled $4.9 billion from hedge funds of funds in the year, an increase of 44%.
Among 2016's biggest defectors:
- New York City Employees' Retirement System redeemed its entire $1.5 billion hedge fund portfolio of the $51.2 billion defined benefit plan;
- Illinois State Board of Investment, Chicago, with total assets of $14.6 billion, reduced its hedge fund-of-funds portfolio to a 3% target from 10%, terminating three firms managing a total of $989 million and reducing the allocation of the remaining manager by $237 million to $440 million;
- New Jersey Division of Investment, which manages the $72.2 billion New Jersey Pension Fund, Trenton, fully redeemed a total of $2.3 billion from 14 hedge funds after more than halving target hedge fund allocation to 6% from 12.5%.
Announced search activity virtually evaporated last year: The combined total for hedge funds and hedge funds of funds was just $52 million — a 99% decline compared with 2015.
The year's biggest move in hedge funds was the outsized $10 billion search and subsequent hires of three hedge funds-of-funds managers by the ¥204 trillion ($1.91 trillion) Japan Post Bank, Tokyo. Japan Post Bank's hedge funds-of-funds activity in 2016 was factored out of the aggregate search and investment growth comparison because the mandate size was atypical of the year's activity.