Hedge Funds Grow In 2015 Despite Concerns Over Performance by Preqin

Total assets under management reach $3.20tn in 2015, up from $3.02tn at the end of 2014.

Preqin’s 2016 Global Hedge Fund Report finds that 2015 was another challenging year for the industry, during which the Preqin All-Strategies Hedge Fund benchmark recorded gains of 2.02%, compared with 4.65% in 2014. Despite this, total industry AUM increased by $178bn to reach $3.2tn as of November. Thirty-seven percent of surveyed fund managers said that they have seen an increase in institutional capital in 2015, and 59% reported that their total AUM had increased. Overall the industry saw net inflows of $71.5bn, but this gain occurred entirely in H1, as H2 2015 saw net outflows of $4.8bn across the industry.

Additionally, many investors have expressed concerns about performance going into 2016. A third of surveyed investors said that returns in 2015 had not met their expectations, and the same proportion stated their confidence in the ability of hedge funds to meet their portfolio objectives had decreased over 2015. For the first time, a greater proportion of investors reported to Preqin that they plan to reduce the amount of capital they invest in hedge funds (32%) than plan to increase it (25%) in 2016.

Key 2016 Global Hedge Funds Report Facts:

  • Total Fund Numbers: There were 829 hedge fund launches in 2015, and 695 closures, a net increase of 134. Preqin now tracks in excess of 15,000 active hedge funds run by 6,020 fund managers globally.
  • AUM by Region: North America still represents the largest part of the hedge fund industry, holding $2.31tn in total assets. Europe holds $685bn in AUM, while Asia-Pacific funds represent $159bn.
  • Outlook for 2016: Despite concerns over performance, fund managers are generally upbeat about the year ahead. Sixty-three percent have a positive outlook for the industry in 2016, while 72% think that industry AUM will continue to increase over the coming year.
  • Inflows by Strategy: Equity strategies saw the greatest net inflows in 2015, adding $57.1bn of fresh capital in the year. Both relative value and macro strategies funds saw net outflows, of $18.3bn and $25.6bn respectively.
  • Key Issues: The greatest proportion of investors cited performance (35%) and transparency (21%) as key issues moving into 2016. These issues were also cited as key drivers of change in the industry in 2016 by 33% and 40% of fund managers respectively.

Comment:

“2015 proved to be a challenging year for the hedge fund sector, as it recorded its lowest annual performance since 2011. Although hedge funds outperformed the S&P 500 over the year, this poor performance did not go unnoticed by investors: approximately a third of institutional investors reported to Preqin that hedge funds failed to meet their expectations in 2015.

2016 could prove difficult for fund managers as fundraising looks set to become more challenging. However, if hedge funds can navigate the changeable economic environment, and continue to show better performance in times when traditional markets are struggling, then the value of hedge funds may be proved to those investors that are currently taking a cautious approach to the asset class.”

Amy Bensted – Head of Hedge Fund Products, Preqin

Hedge Funds