Due to high fees and weak performance, many investors are withdrawing their money from hedge funds. Assets under management have decreased by 15 billion to 2.68 trillion Dollar during the first quarter.
For the first time since 2009, investors have withdrawn money from hedge funds in two consecutive quarters, says the Financial Times. In the first quarter of 2016, asset under management of hedge funds have decreased by 15.1 billion Dollar and have fallen to 2.86 trillion US-Dollar, says data from Hedge Fund Research. On a quarterly basis, this is the biggest withdrawal within seven years. With outflows amounting to 1.52 billion Dollar in the last quarter of 2015, the withdrawals have tenfold.
Hedge funds aim at making uncorrelated, positive returns in every market environment. The asset managers could not hold up to that demand. in 2015, hedge funds have lost 3.6 percent on average. In 2014, hedge funds lost about 0.6 percent already. A similar loss can be assumed for the first quarter of 2016. With continuing losses, hedge funds can no longer justify their fee structure. Too high fees are thus quoted as the main reason for investor’s withdrawals.
Especially big industry names lose money. Two thirds of the outflows are from firms that manage more than five billion. On the other hand, small asset managers can accumulate inflows of 730 million. Moreover, there are differences regarding out- and inflows and investment themes: While activistic hedge funds lose money, multi-strategy funds receive additional money from investors.