Investors have pulled $10 billion from hedge funds this year
Hedge funds are expecting to get clipped in 2018.
Already tepid returns in the industry have led to $10.1 billion being yanked from the funds through October, according to an eVestment report out Wednesday.
And the experts expect more redemptions this quarter due to the mix of poor returns and December usually being a month of “elevated” outflows, even during the boom times.
“It’s clearly a difficult time,” said Peter Laurelli, global head of research at eVestment.
Although new money was added to the $3.2 trillion industry in the first half of 2018, continued volatility and weak returns have investors headed for the door.
By eVestment’s measure, hedge funds lost 2.6 percent through October on average, while the S&P 500 gained 3 percent.
But those figures don’t account for this volatile November in which the stock market has given up all its gains for the year.
Hedge funds typically allow their clients to redeem funds only a few times a year.
Investors looking to get out by year-end generally have to let the fund know by Nov. 15.
While some investors are shedding formerly high-flying tech stocks for more stable plays in utilities and consumer staples, it is believed some of the recent sell-off is due to hedgies shedding assets to meet redemption requests.
“Hedge funds are taking redemptions from companies they should not be selling,” said Brian Belski, chief investment strategist at BMO Capital Markets.
There have been only three other years that money left the industry since 2004, eVestment noted, referring to 2008, 2009 and 2016.
“The [amount of] redemptions are a sign of a bit of disappointment,” Laurelli said.
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