Hedge Funds AUM Decreased 2.50% In August 2015 by eVestment

Renewed allocations to equity exposure and redemptions from managed futures highlight allocation shifts.

Total hedge fund assets decreased 2.50% in August 2015, bringing the industry’s total assets under management to $3.053 trillion. Investors added an estimated $10.5 billion into the industry in August, while performance decreased AUM by an estimated $78.4 billion.

With August’s $10.5 billion inflow, investors have added an estimated $74.7 billion into hedge funds in 2015. This compares to $113.9 billion through August of 2014, however investors redeemed nearly $26 billion in the final four months last year.

There have been multiple reversals of apparent investor preferences throughout 2015, however the one consistent theme has been investors’ interest in multi-strategy products. August’s inflows of $6.6 billion brought YTD inflows to $48.6 billion which surpasses full year 2015 allocations to the strategy.

Large multi-strategy products have been dominating the asset raising environment. The average size of the 20 largest asset gaining multi-strategy products in 2015 is nearly $7 billion. These top 20 asset gainers have $140 billion in AUM and have raised $14 billion in new asset in 2015.

Hedge Funds AUM

Investors have an appetite for equity hedge funds

Investors’ preferences for strategies operating in equity markets has varied in the last nine months with flows being negative in four of the nine. August’s $9.7 billion inflow followed July’s $5.5 billion of redemptions and brought YTD flows to positive $20.9 billion. It is apparent investors have an appetite for equity hedge funds,however the sentiment is not nearly as strong as 2014.

Managed futures fund flows look set for their first negative month since December. What appeared to have been a nearly flat month of flows in July was revised firmly higher, however products currently reporting to eVestment indicate redemptions of $3.2 billion in August. Given roughly 75% of the available assets have been reported, along with the magnitude of the outflow, it is highly likely August flows will remain negative.

The significance of managed futures funds’ August redemptions is the timing of which it arrived following a period of performance declines. The universe experienced elevated losses in April and June, and again in August at a rate which rivaled June’s large losses. The implication is that more redemptions could be ahead for the universe as investors digest recent losses.

Investors added money to event driven strategies in August, another instance of investors deviating from prior month actions. The $1.7 billion inflow followed elevated outflows in July, which was the universe’s fourth monthly redemption in the last five months.

Hedge Funds AUM

Macro hedge funds flow cooled down

Flows into macro hedge funds cooled after six consecutive months of inflows. The universe’s flow trends have been similar to their managed futures peers, however with less magnitude to August’s outflow. The universe did experience large performance declines in June and again in August so it will be interesting to see how investors react heading into Q4.

The recent two month string of inflows into commodity strategies ended in August with investor redeeming nearly $530 million. YTD flows are only slightly negative, however recent performance losses make it unlikely investors will return en masse in the near term.

Emerging market fund flows were negative again in August, but like the redemption in July, not enough to offset Q2 2015’s inflow of $2.2 billion. Flows are still highly negative for the year (Q1 saw redemptions of $5.7 billion).

Hedge Funds AUM

Investors take a breather from EM exposures

It appears investors are taking a breather from EM exposures. eVestment’s $868 billion traditional EM equity universe experienced redemptions in Q2, only its second since 2009, and the $440 billion traditional EM fixed income universe has experienced redemptions in eight of the last nine quarters.

Following elevated losses in China, investors also appeared to take a step back from funds investing in Asia in August. Following six consecutive months of inflows when investors allocated $7.5 billion into Asia-focused funds, August’s slight redemption of $540 million is significant because it could signal the beginning of more outflows to come as the universe has posted elevated losses for three consecutive months.

Despite the redemptions from funds investing in Asia, funds domiciled in Asia continued to see inflows in August and have received and estimated $12.3 billion in 2015.