Investors Withdraw $7 Billion From Hedge Funds in June

Despite signs of a rebound, sentiment turns negative on the asset class, bringing YTD inflows down to $20.65 billion.

Investors pulled $7 billion from hedge funds in June, bringing YTD inflows down to $20.65 billion, according to that latest report from research firm Evestment. Flows for Q2 2017 totaled a positive $7.54 billion.

“June was the first month of 2017 where allocation and redemption decisions appeared less influenced by prior-year returns, and more influenced by current-year performance,” the report said. “While on the surface this seems positive for segments like event-driven, long/short equity, and many credit managers, that comes with the assumption that investors who left these segments for other alternatives will come back. As always, time will tell us investors’ sentiment, but for now, the industry again appears to be approaching a crossroads.”

Macro hedge funds were among the largest losers in the month, with outflows of $6.38 billion. That follows five months of inflows for the year, despite lackluster performance.

“Good relative returns from many larger macro funds in 2016, along with a landscape ripe with geopolitical tensions and perceived stretched equity market valuations drew investors into the strategy,” the report said. “Through H1 2017, however, returns from the universe have lagged most other strategies, and the largest managers have underperformed their peers. Five of the six largest asset losers in the strategy in June had negative H1 returns, which averaged nearly -6%.”

Interest in emerging market-focused hedge funds grew during the month, the second quarter and YTD, attracting $1.2 billion in the last category.

“The six consecutive months of very strong relative returns from EM strategies compared to their developed markets peers appears to have drawn some interest from investors,” the report said. “Revised data from May, and data from June indicate two consecutive months of strong inflows, which hasn’t happened since mid-2016, and then since mid-2015.”

The largest allocations in June went to emerging market credit strategies, the report said.

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