Michael P. Regan, Columnist

Hole in the Hedge-Fund Bucket

Funds that both buy and short stocks are responsible for most asset withdrawals.

August 17, 2016 at 4:56 PM UTC

Michael P. Regan is the global team leader for cryptocurrencies at Bloomberg as well as a former senior markets editor and former Americas team leader for Bloomberg's Markets Live blog. He has covered Wall Street for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

You've probably heard about the hole in the hedge-fund bucket that is causing assets to leak out.

What's remarkable is that it's not so much an exodus from the entire alternative-management industry but rather from one specific strategy: funds that both buy and short stocks. Investor redemptions for the entire hedge-fund industry totaled $20.7 billion over the three months through July, according to Eurekahedge. In the same period, long/short funds had $18.4 billion withdrawn. An estimated $6.6 billion flowed out of long/short funds last month alone:

Long/short equity hedge funds are the biggest strategy, managing almost $800 billion of the $2.25 trillion invested in the industry, according to Eurekahedge's tally. But even as a percentage of assets, they are leaking money at the fastest rate: 0.8 percent of the amount of assets at the start of July, or almost three times the percentage lost in the strategy that saw the next biggest biggest withdraws, macro.