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Alternative Market Briefing

Hedge funds total redemptions reduced from $47.7bn in Q1 to $15.6bn in Q2

Monday, August 31, 2020

Laxman Pai, Opalesque Asia:

Hedge fund assets under management (AUM) have risen in the second quarter of 2020, said Preqin. In a Q1 2020 rocked by poor performance and significant investor redemptions, industry AUM dipped below $3.5tn for the first time since Q4 2018.

Fast-forward three months and AUM have returned above this threshold to stand at $3.58tn, after a recovery in performance in Q2 (+11.48%) offset Q1's net outflows.

According to the report, total redemptions reduced from $47.7bn in Q1 to $15.6bn in Q2, a big improvement. Despite this, the hedge fund industry AUM remains 2.1% below the level at which it started the year.

With markets arguably becoming increasingly disconnected from fundamentals, timing the market has become more of a challenge for some managers.

At $3.9bn and $3.3bn respectively, relative value and multi-strategy were the only top-level strategies tracked by Preqin to achieve positive capital inflows during Q2.

Relative value strategies' ability to bet on market divergences without having to make directional market bets may have proved advantageous. The long/short nature of these trades can result in an inherent lack of net market exposure.

In contrast, event-driven strategies were hardest hit by investor redemptions, with $6.4bn withdrawn. In total, $14.7bn has been withdrawn from event-driven strategies during H1 2020, leaving AUM at $162.7bn.

These strategies are heavily dependent on the trading opportunities that c......................

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