Hedge funds see three-month losing streak

Graph downOctober became the third consecutive month of losses on an asset-weighted basis for hedge funds globally, a pattern not seen since the 2008 financial crisis.

It also became the second consecutive month of outflows for the industry, with data from eVestment showing $2.94 billion (€2.35 billion) leaving the industry. Two consecutive months of net outflows were last seen in mid-2012 in the wake of volatility from the European sovereign crisis.

Driven partly by volatility, the majority of redemptions came from funds with elevated losses in June and July. Even though several of these hedge funds performed well in October and September, eVestment notes that "redemption decisions appear to have been solidified".

Assets under management remained virtually unchanged at $3.020 trillion.

Performance gains were recorded mainly among large hedge funds, but hedge funds in aggregate lost 0.28% in October, compared to a S&P 500 Total Return gain of 2.44% over the same time.

"The [hedge fund] universe had not produced three consecutive months of negative asset-weighted returns since the 2008 financial crisis, though losses in mid-2011, the onset of Europe's sovereign difficulties, were greater than the universe's current drawdown," eVestment notes.

Macro and managed futures strategies saw the highest level of redemptions, with $3.35 billion and $2.77 billion, respectively.

Hedge funds pursuing relative value credit, long/short equity, mortgage-backed securities, directional credit and convertible arbitrage strategies all suffered outflows.

Those pursuing a broad multi-strategy saw combined inflows of $2.04 billion, followed by distressed, with $1.04 billion. Hedge funds pursuing a market neutral equity and event-driven strategies saw inflows on a smaller scale.

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