The economic fallout caused by the COVID-19 pandemic had a significant impact on the hedge fund industry in Q1. Industry assets under management (AUM) fell by 9.4% from Q4 2019, to $3.31tn as of 31 March 2020. This is the first time AUM has fallen below $3.5tn since Q4 2018. Poor performance accounted for the majority ($296.1bn) of lost assets, with investor redemptions totaling $47.7bn. This brings hedge funds to eight consecutive quarters of outflows.
Q1 2020 hedge fund letters, conferences and more
Almost All Hedge Fund Strategies Suffered Outflows In Q1
Almost all top-level strategies suffered outflows in Q1. Macro strategies and CTAs recorded the greatest capital withdrawals, at $10.8bn and $10.7bn respectively (Fig. 1). Event driven strategies followed closely behind: investor redemptions totaled $8.3bn for the quarter following a poor return of -16.72%. The strategy lost just over a fifth (21%) of all assets as AUM dropped to $152.7bn. Only niche strategies recorded inflows, with 54% of such funds experiencing inflows (Fig. 4); though at $0.3bn these gains were incremental.
Managers based in the Rest of the World region endured a very tough first quarter of 2020. Following significant volatility and poor performance, investors withdrew $12.6bn (Fig. 2). Subsequently, AUM dropped to $20.8bn – marking a 44% fall since the end of 2019. North America was the only top-level region to record net inflows, at $25.4bn.
The data shows that funds that perform well are more likely to receive investor inflows. Among hedge funds that returned +5.00% or more in H2 2019, 35% recorded inflows in Q1 2020, the greatest proportion seen in Fig. 7. This trend is similar over a three-year timeframe (Fig. 8). Any funds able to navigate the COVID-19-induced market disruption to produce a positive return are likely to build a strong track record that may help secure future investments.
Article by Preqin
