Industry observers said net outflows and performance were significant contributing factors to AUM declines for many hedge fund managers in the year ended June 30.
Net redemptions from the hedge industry totaling $44.6 billion in the first half of 2019 by all types of investors took a toll on assets under management, data from eVestment LLC, Marietta, Ga., showed.
About 62% — $27.8 billion — of net outflows during the six-month period occurred in the second quarter. That total was more than twice the previous second-quarter peak net redemption of $13.5 billion (second quarter 2016) over the 10-year period ended June 30, eVestment researchers said in a report.
In contrast, net outflows in all of 2018 were $37.2 billion, according to eVestment.
Tough market conditions in the fourth quarter last year hit many hedge fund managers hard, impacting performance for the full 12-month period ended June 30, said Kenneth J. Heinz, president of Hedge Fund Research Inc., Chicago, which manages the HFRI indexes.
In the quarter ended Dec. 31, the HFRI Fund Weighted Composite index was down 6% and the HFRI Asset Weighted Composite index declined 2.4%.
In the year ended June 30, the HFRI Fund Weighted Composite index was up 1.3% and the HFRI Asset Weighted Composite index was up 2.7%, in contrast to the one-year returns of the indexes as of June 30, 2018, of 5.7% and 5.3%, respectively. "The fourth quarter, especially in December, was a reminder to investors who were (previously) happy with their long-only equity that hedge fund strategies like global macro and relative value arbitrage are needed in their portfolios," Mr. Heinz said.
The fallout from performance challenges and net outflows for hedge fund managers was an elevated number of firms with asset declines in the year ended June 30.
For the third year in a row, more hedge fund managers reported growth in assets than declines or flat levels in the year ended June 30, but just barely.
Within P&I's universe, 40% of hedge fund managers reported gains in worldwide assets under management while 39% experienced declines and 4% were flat. About 17% of the firms were new to the survey or comparative data were not available.
The percentage of hedge fund managers that suffered AUM declines in the year ended June 30 was 13 percentage points higher than the 26% of firms reporting losses as of the same date a year earlier.
The span of gains and losses among individual hedge fund managers was wide.
Credit hedge fund specialist Birch Grove Capital LP, New York, produced the largest gain — 69.4% to $1.6 billion — in assets managed worldwide in hedge funds in the year ended June 30.
New York-based Greenlight Capital Inc. suffered the largest decline in the year, down $3 billion, or 54.5%, to $2.5 billion.