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Global hedge fund industry ends 2020 with positive signs for 2021

Monday, January 25, 2021
Opalesque Industry Update - Investors pulling $58.76 billion from hedge funds around the world in 2020 may not be cause for celebration, but that $58.76 billion in redemptions was dwarfed by the $102.25 billion investors pulled from hedge funds in 2019. And while investors pulled $9.74 billion from hedge funds in December, since 2009 the average December net flow has been -$16.5 billion. This makes December's $9.74 billion redemption "a decent figure for the industry," according to eVestment Global Head of Research Peter Laurelli, writing in the investment data and analytics firm's just released December and Year-End 2020 Hedge Fund Asset Flows Report.

Combined with the hedge fund business' strong performance in 2020 (see page 3 of the report) and investors' continued interest in diversifying their portfolios with alternatives, hedge funds are ending 2020 and going into 2021 on some strong notes. The industry ended 2020 with total assets under management of $3.359 trillion, according to the new eVestment report.

Macro hedge funds were the big December asset winners among the primary strategies eVestment tracks, pulling in +$5.55 billion in the last month of the year. These funds are among the biggest AUM losers for the 2020 overall, however, with Macro funds seeing -$12.42 billion in investor redemptions for the full year.

Other interesting points from the new report include:

Event Driven funds eked out a positive December for asset flows, adding +$550 million in new money, but were the biggest asset winners among primary strategies for 2020, with full year flows at +$5.95 billion.

Managed Futures funds is one segment where performance appeared to have a clear impact on year-end flows, with investors adding +$2.14 billion in December following a surge in performance at the end of the year. Some of the largest December inflows were to products that produced double-digit gains in 2020, but also to a few funds with mediocre performance. These strategies still ended up in the red for asset flows in 2020, with full-year flows at -$6.61 billion.

Prior to December, Multi-Strategy hedge fund net flows had been positive, but with investors pulling -$5.80 billion from these funds in December, full-year 2020 flows landed in negative territory as well, at -$4.49 billion for the year. This comes on top of -$18.31 billion investors pulled from these funds in 2019.

Long/Short Equity fund managers who failed to perform in 2020 were punished by investors, with the segment losing -$5.03 billion in AUM in December and -$16.99 billion for full-year 2020. The group driving outflows in December produced average returns of around -10% in 2020 and the 10 largest redemptions for the year came from products producing average returns of -6.4%.

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