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Alternative Market Briefing

New investments in hedge funds slow to a trickle

Thursday, March 24, 2016

Bailey McCann, Opalesque New York:

New investments in hedge funds slowed to a trickle in February coming in at $4.4 billion – with performance losses of $24.5 billion dropping overall industry AUM to $2.94 trillion, according to the just-released February 2016 eVestment Hedge Fund Asset Flows Report.

February has historically seen elevated flows into the industry. Over the prior six Februaries, from 2010 to 2015, investors added an average of $22.6 billion in net new capital to hedge funds, according to eVestment data. The dramatically reduced new investment into hedge funds this February reflects investor dissatisfaction with 2015 returns. While overall asset flows are a challenge for the industry, funds that performed well in 2015 have been the beneficiaries of investor interest so far in 2016. In the first two months of the year, hedge funds that posted gains of 5% or better in 2015 have received nearly $14 billion in allocations, while those with negative returns in 2015 have had $28 billion redeemed.

Despite all of this negativity, commodity strategies are seeing inflows again. February saw $1.8 billion, which was the largest in the current streak of six consecutive months of positive investor sentiment for commodity-focused hedge funds.

Fixed-income/credit focused hedge funds saw inflows of $2.5 billion in February, with larger funds being the primary beneficiaries. This represents a rebound for the strategies which had seen months of redemptions.......................

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