Investors pull $33bn from hedge funds in first quarter

Withdrawal of about 1 per cent of industry's capital is highest quarterly drawdown since the second quarter of 2009

Hedge funds run by some of the industry's biggest names, including Bridgewater Associates founder Ray Dalio (pictured), experienced outflows as more money was pulled from the asset class during the first quarter than at any time since the height of the last financial crisis in 2009. BloombergShow less

Investors pulled a net $33 billion (Dh121.2bn) from hedge funds in the first quarter, the most in more than a decade.

The total is about 1 per cent of of industry capital, and the largest quarterly outflow since investors yanked about $42bn in the second quarter of 2009, according to a report on Wednesday from Hedge Fund Research.

Some of the industry’s largest names took a hit in last month’s market tumult, including funds run by Ray Dalio, Michael Hintze and Adam Levinson. The managers suffered losses as the coronavirus crisis brought much of the global economy to a standstill.

Still, a slew of firms are welcoming fresh money from investors hoping to buy the market dip and capitalise on market dislocations.

“Investors reacted 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,” HFR President Kenneth Heinz said in the report.

“While volatility and market dynamics remain fluid through early 2Q,” he said, “dislocations created by indiscriminate selling from traditional asset management have created significant opportunities for specialized long-short funds, which are likely to benefit both forward looking funds and institutional investors in coming quarters”.

Macro hedge funds led net outflows in the period, with $22bn leaving the strategy, HFR said. The redemptions from funds that bet on economic trends come even as they led performance among broader strategies in the quarter, down 7.3 per cent on an asset-weighted basis.

Total industry capital declined to $2.96 trillion globally in the quarter, the first time assets dropped below the $3tn mark since 2016, HFR said. Hedge funds broadly fell 10 per cent in the period.