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    Asset Managers / Insights

    Hedge Fund Industry Asset Flow Report: January 2024

    News: 18 March 2024

    By: Peter Laurelli, CFA | Nasdaq eVestment Global Head of Research

    2024 Starts with Elevated Redemptions for Some Hedge Funds

    The headline flow number to start 2024 was not positive. The industry had its largest net outflow to begin a year since 2016 and it was the second largest net outflow to begin a year since January 2009. January typically isn’t a month which defines a year, but when it has been negative the year’s flows tend to head in that direction.

    The reality within this January’s data is that while the picture entering 2024 is not rosy, it is also not as bad as the headline figure would make it seem. The large net outflows during the month mostly appeared due to lingering redemption pressures facing a relatively isolated group of firms that may in part be performance related, but also idiosyncratic to institutional portfolios’ longer-term allocation changes.

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    Industry Flows

    HF asset flows table Jan 2024

    This was a large net outflow for a January.

    January’s data does not tend to indicate large net flows, either in or out. Over the last seven years, no months had a net flow greater than $10 billion in either direction and the larger values tended to be positive. The largest net outflow in this span was just more than $4 billion and the largest net outflow in a January over the last fifteen years was in 2016 when nearly $20 billion was removed. January 2024’s data indicated the second largest net outflow to begin a year since 2009, second only to 2016. This was not a great start to the year.

    Were January 2024 flows as bad as they seem?

    Looking back over this seven-year period of January’s data we see that outside the generally light flows indicated in the data, the proportions of products seeing net new money coming in has averaged around 50%. In January 2024 it was 42%, but there were other metrics that weren’t nearly as negative. For example, the proportion of products whose redemptions were greater than 2% of AUM was 24% and that level has been matched multiple times in the prior seven years and even exceeded in January 2019. Additionally, the % of products who lost greater than 5% of AUM was actually the lowest of any January since at least 2016. What’s making the January net outflow the largest since 2016 is the result of two factors, very few meaningful new allocations, which isn’t rare in January’s data, along with very few but large redemptions and a few smaller outflows. If this were any other month than January, it wouldn’t feel so bad.

    Volume of Net Flows

    HF asset flows bar Jan 2024

    Source: Nasdaq eVestment. 

    Longer-term performance issues appeared to weigh on long/short equity flows.

    There were very few, but some very large net outflows among long/short equity funds in January and it appears they may be tied to performance issues. The group contains larger funds which, over the course of the prior three years, generally underperformed leading up to and into the difficult periods of 2022 and then did not participate nearly as fully in the more positive market environments that followed. That time frame is still a relatively narrow window in an investment lifecycle, but at the same time it is impossible to ignore the size of the redemptions and performance relative to peers.

    Isolated but large redemptions continued for macro funds into 2024.

    For much of 2023 we noted the issues facing macro hedge fund flows were fairly isolated, but significant, and that’s just the way 2024 started. While there were a smattering of redemptions from funds in January and very few new allocations, there were a couple of very large net outflows from funds which also had meaningful redemptions in 2023 and even in 2022. It is the flows from these funds that are skewing the macro flow data so significantly negative.

    The rest of the data for January wasn’t that bad.

    Take away the issues within macro and long/short equity, albeit significant, and the rest of the landscape of January 2024 wasn’t too bad. There were some redemptions from managed futures and multi-strategy, but at the fund-level nothing that appeared concerning. There wasn’t much in terms of inflow highlights outside of some allocations to distressed products, but overall, the issues in 2024 appear isolated.

    Industry Performance

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