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Hedge fund flows unaffected despite rise of alternative Ucits

The flow of capital into hedge funds in Asia was up about 17x year-on-year in 2015, the only global region to show growth. Hedge fund capital flows in Asia soared to $3.9bn in 2015 compared to $220m the previous year, according to the data provider.

By comparison, the US had outflows of $20.8bn in 2015, a sharp reversal from the previous year’s inflows of $35bn. In Europe, hedge fund inflows fell to $20.2bn versus $21.9bn in 2014. Hedge fund inflows kept up quite well despite inflows into alternative Ucits funds, the mainstream alternative to offshore hedge funds, rising by 60% to €80.1bn in 2015.  

In December, total hedge fund assets worldwide fell $58.2bn, reducing the industry’s total assets under management to $3trn. Investor flows were negative in that month, with an estimated net $24.6bn redeemed. Performance, or rather the lack thereof, accounted for the remaining $33.7bn decrease.

In its report, Evestment said that the industry’s large redemptions in December should not be viewed solely in the context of negative sentiment. Historically, December has been a month where redemptions far outpaced new allocations. The average December net flow over the last five years has been negative $18.2bn.

Performance of hedge funds with regional exposure in Asia was down by half to an aggregate return of 3.6% from 7.4% in 2014. Yet hedge funds focused on Asia were the best performing region globally.


           Hedge fund performance

 Source: Evestment


Are commodities turning?

Every major strategy and market exposure were hit by redemption pressure in December, with the exception of commodity-focused strategies. 

This signals a shift in investor sentiment, though it has arguably coem a little early… Since mid-2011 through May 2015, investors made redemptions within commodities-focused strategies. However, in the last seven months ending in December, allocations were positive in all but one month.

“The inflows of $1.8bn in this stretch are an indication investors see opportunity in the commodity space,” the report said.

However, investor sentiment toward credit hedge funds remained negative, with $6.1bn in redemptions in December, following larger redemptions of $7.9bn in July and $9.9bn in October.

Sentiment towards macro funds has also been bearish following high-profile fund losses and closures. Macro funds suffered $6.6bn in redemptions in December, double the average net outflow of $3bn in the last four years. 

Drew Wilson

Drew Wilson is editor of Fund Selector Asia. Previously he was editor at a publication covering private equity.

Part of the Mark Allen Group.