Hedge fund industry assets under management fell 11% to $2.957 trillion in the quarter ended March 31, the first time aggregate AUM has fallen below $3 trillion since third quarter of 2016 when assets totaled $2.972 trillion, data released Wednesday by Hedge Fund Research showed.
By contrast, hedge fund assets hit a peak of $3.324 trillion in the quarter ended Dec. 31.
The $366.5 billion decline in hedge fund AUM in the first quarter of 2020 overwhelmingly was the result of $333.2 billion in performance losses plus $33.3 billion of net outflows.
Returns of the firm's broad hedge fund indexes in the quarter ended March 31 were down 9.4% for the HFRI Fund Weighted Composite index and down 10% for the HFRI Asset Weighted Composite index.
Total net outflow in the three months ended March 31 was the hedge fund industry's fourth largest after net outflows of $151.7 billion in fourth quarter of 2008; $103.3 billion in first quarter of 2009; and $42.8 billion in second quarter of 2009, HFR data showed.
HFR researchers said in the report accompanying the data release that net outflow in the first quarter of 2020 equaled about 1% of industry assets, much lower than the nearly 9% of industry capital redeemed in the fourth quarter of 2009.
The breakdown of net outflow and performance-related changes within HFR's four broad hedge fund strategy categories in the quarter ended March 31 were:
- Macro strategies had the highest net outflow of $22.6 billion with performance loss of $16.7 billion.
- Event-driven hedge fund firms had the lowest aggregate net outflow of $2.4 billion and performance loss of $130.7 billion.
- The equity hedge category had the largest performance loss of $134.2 billion with net outflow of $3.8 billion.
- Relative-value hedge fund managers had net outflow of $4.6 billion with performance loss of $51.6 billion.
HFR research found that net outflow in the first quarter was concentrated in the largest hedge fund managers with an estimated $20.6 billion redeemed from managers running a total greater than $5 billion. Firms with $1 billion to $5 billion had outflows of $11 billion in the quarter while managers with less than $1 billion had redemptions of $1.6 billion.
The total does not match HFR's net outflow figure of $33.3 billion because of rounding.
In the report, Kenneth J. Heinz, HFR's president, attributed the first-quarter results to investors reacting to "the unprecedented surge in volatility and uncertainty driven by the global coronavirus pandemic, with a historic collapse in investor risk tolerance and the largest capital redemption from the hedge fund industry since post-financial crisis."