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Weak Investor Allocations Continue To Weigh On Hedge Funds

Hedge funds did a bit better last month in terms of performance-based gains, but unfortunately investor outflows continued, according to data from Eurekahedge. Overall the Eurekahedge Hedge Fund Index was in the red for September while the broader world market was in the green.

Hedge funds down 0.06%

Preliminary data indicates the index declined 0.06% in September, while the MSCI World Index was up 0.07% for the month. Hedge funds with a focus on Asia continued to struggle while U.S. funds continued to recover. Funds focused on Greater China struggled the most as the trade war between the U.S. and China continued.

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Preliminary September data suggests $5.2 billion in performance-based gains and net outflows of $4.1 billion for the month. Eurekahedge's final numbers for August point to performance-based losses of $2.3 billion and net outflows of $4.3 billion for the month.

After combining the September and August numbers, Eurekahedge pegs assets under management in the world's hedge fund industry at $2.45 trillion.

Weak Investor Allocations Continue To Weigh On Hedge Funds

2018 is shaping up to be the worst year since 2011

According to data from Eurekahedge, the first nine months of 2018 have made it the worst year since 2011. Hedge funds are up 0.26% year to date through September. The only year they recorded a worst performance was in 2011, when they were down 2.96% for the first nine months of the year. This year less than half of hedge fund managers are in the green year to date, and just 11% of them have recorded double-digit growth, according to Eurekahedge.

Asset growth across the global hedge fund industry has been exceptionally weak this year, thanks to performance-driven losses and lackluster investor allocations. Eurekahedge reports that total assets under management are up only $8 billion for the first nine months of the year, compared to the $150.7 billion increase recorded in the first nine months of last year.

Redemptions have been steep this year, with investors pulling $31.4 billion from hedge funds between February and September.

CTAs/ managed futures funds hit the hardest

Of all the main hedge fund strategies, CTAs/ managed futures funds are down the most. They shed $21.3 billion in assets under management just in the first eight months of the year. When it comes to redemptions, however, multi-strategy hedge funds have been hit the hardest with investors pulling $19.4 billion in assets from them this year.

North American hedge funds are the one bright area in equities and fixed income. Long/ short equity funds in North America are up 5.74% for the year, and fixed income funds in the region are up 5.35% through the end of September. Meanwhile long/ short equity funds with a focus on emerging markets are struggling with a 6.32% decline year to date. EM-focused fixed income funds are down 1.56% for the year, according to Eurekahedge.

Macro hedge funds were on top in September, but long/ short reigns supreme

Eurekahedge also reports that macro hedge funds saw the biggest performance-based growth at $1.9 billion last month. Meanwhile long/ short equities funds struggled the most with $1.6 billion in performance-based losses.

Weak Investor Allocations Continue To Weigh On Hedge Funds

Even though the long/ short equities strategy struggled in September, so far it has been the best-performing hedge fund strategy on a year-to-date basis. Long/ short equities funds have racked up $18.8 billion in performance-based gains, according to Eurekahedge, putting them in first place for the year.

CTA/ managed futures funds are performing the worst on a year-to-date basis with $7.1 billion in performance-driven losses. However, the hedge fund strategy is making a comeback, given that CTA/ managed futures funds recorded $22.6 billion in performance-driven losses just in February alone.

Weak Investor Allocations Continue To Weigh On Hedge Funds

This article originally appeared on ValueWalk Premium