For the first time since 2011, investors have pulled more money out of hedge funds than they invested. Still, the industry’s AuM rose as performance gains outweigh investor’s withdrawals. Especially big funds were successful in 2015.
According to Hedge Fund Research (HFR), investors have withdrawn a net amount of $1.5 billion from hedge funds in the last quarter of 2015. Due to performance gains, AUM of hedge funds has increased by $22.8 billion to $2.9 trillion in the fourth quarter of the previous year. For the full year of 2015, hedge fund capital increased by $51.7 billion with net investor inflows of $43.7 billion.
“The global hedge fund industry expanded in 2015 as global financial markets entered into an important and uncertain transitional macroeconomic environment, resulting in acceleration of asset volatility and wide performance dispersion across hedge fund strategies,” says Kenneth Heinz, president of HFR, in a press release.
The HFRI Fund Weighted Composite Index rose 0.8 percent in the last quarter but dropped one percent for the full year. Gains were concentrated on the biggest funds with firms managing more than $5 billion in assets gained a total of $31.3 billion.
Overall, the environment for small hedge funds is getting more stressing. Susan Lock, Partner at Campbells, says that the launch environment for new funds and emerging managers has become harder, more competitive, costly and more time consuming - mainly due to regulatory reasons.
"Investment managers now have to not only show a compelling investment strategy and a proven track record but they also have to show sophisticated systems, controls, policies and procedures that support their business structures. That is putting pressure on emerging managers. They have to structure their products to satisfy institutional investors and answer due diligence requests regarding all aspects of their business and structuring, rather than simply answering investment strategy questions," says Lock.