A recent report by Aurum Funds, the Bermuda-based hedge fund specialist, showed that this industry lost approximately $80bn up to 18 October so far this year. Despite these losses, hedge funds managed Q3 net profits of roughly $119bn. This report tracked 3,402 funds managing a total of $2.9tn in assets.
Hedge fund industry loses $80bn as investors channel funds elsewhere
According to a Reuters view on the matter, these losses can be chalked up to a decrease in investor interest as they look for higher returns in other investment possibilities. For this year, Aurum indicated multi-strategy hedge funds performed the best with a 5.9% positive return. Credit hedge funds took second place, recording a 5.6% positive return.
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Experts opine the carrot of rising bond yields attracted investors and moved hedge fund investments to the backburner. However, this was not the only reason for the hedge fund net outflow. Reuters quoted the founder and chief executive officer (CEO) of Agecroft Partners, Don Steinbrugge, who added:
In addition, there has been a lot of assets flowing to private credit.
In the six months leading up to 1 November, the 10-year yield on US government bonds increased by 146 basis points. As per the Aurum report, hedge funds relying on long trades and equity increases had the weakest performance with a 2% negative return.
Other interesting takeaways from the mentioned report include a 4.9% compound annual return (CAR) for hedge funds at the end of Q3 and decreases of 3.8% and -3.5% for global equities and bonds respectively.
