Hedge Funds Suffer First Quarterly Net Outflows in 4 Years

  • Typical fund lost 1% in 2015; biggest firms raised most funds
  • `Brexit' now a key investment theme, Hedge Fund Research says

Investors withdrew more money from hedge funds than they added between October and December in the industry’s first quarterly net outflow in four years, according to a research report.

Investors pulled a net $1.52 billion from the $2.9 trillion industry in the fourth quarter of last year, Chicago-based Hedge Fund Research said Wednesday. The typical hedge fund lost 1 percent in 2015, even after rising 0.8 percent in the fourth quarter, according to the firm’s HFRI Fund Weighted Composite Index.

Investors are “looking for strategies that will help preserve capital” in a volatile market environment, Hedge Fund Research president Ken Heinz said at a press briefing in London. “They are positioning for anything but the S&P 500 Index making 30 percent in 2016.” He said he doesn’t expect net outflows to continue.

Bigger hedge funds were more successful attracting money last year, Hedge Fund Research said. Firms managing more than $5 billion added $31.2 billion, compared to $6 billion for all firms in the $1 billion to $5 billion bracket.

Brexit Debate

Heinz said the ‘Brexit’ debate about the U.K.’s potential departure from the European Union was identified as a key issue for global macro hedge funds.

“People are very focused on it as a theme for their fund,” he said. “There is a lack of consensus as to what the end result will be.”

U.K. Prime Minister David Cameron has promised a referendum on EU membership by the end of 2017. Hedge funds could bet on the vote by taking a position on the U.K. stock market or the pound, Heinz said.

Other issues facing hedge funds this year include the implications of oil’s continuing decline, questions over the liquidity of credit markets and “geopolitical risk factors” such as terrorism, Heinz said.

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