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H1 2022 hedge fund flows: AUM declined by $31.2bn in June

Friday, August 05, 2022
Opalesque Industry Update - Hedge fund industry AUM declined by $31.2bn in June, marking the steepest loss in AuM since March 2020, the start of the pandemic, said Eurekahedge Report.

Europe (-$11.0bn) and North America (-$6.2bn) accounted for most outflows as investors in the two regions sought to preserve their capital after the sharp equity market downturn.

Funds in Europe (73%) were most likely to have had outflows in H1 2022 as the region's proximity to the Russia-Ukraine war and rising interest rates negatively impacted investor sentiment.

Fixed income (-$6.5bn) and long/short equities (-$5.6bn) posted the largest outflows as the consecutive rounds of interest rate hikes by the Federal Reserve prompted investors to shift their investments away from equity and fixed income strategies. However, multi-strategy funds attracted a net inflow of $3.8bn in June as investors favored a more diversified investment approach during periods of heightened uncertainty.

2022 has been an extremely challenging year for the hedge fund industry as AuM declined by $79bn in H1, driven by $37.7bn of performance-based decline and $41.1bn of net outflows.

Europe posted the sharpest H1 net outflows of $36.0bn as investor sentiment in the region was most impacted by the ongoing Russia-Ukraine conflict and European dependence on Russian energy supplies.

Funds in North America (45%) were most likely to have had inflows in H1 as it is more insulated economically from the Russia-Ukraine conflict. It also has the most sophisticated hedge fund market, giving investors greater confidence that the region can navigate the turbulent financial markets in 2022.

Most hedge fund strategies have struggled to attract net inflows in 2022 amid the challenging market environment. Macro fared best, with 46% of funds managing to attract net inflows in H1. Whereas only 32% of fixed income/credit and 34% of long/ short equity hedge funds attracted net inflows in the same period. The rising interest rate environment has severely impacted the performance of these two strategies

Fixed income (-$21.6bn) and long/short equities (-$21.2bn) posted the steepest outflows in H1 as the two strategies struggled amid the rising interest rate environment, resulting in performance-based declines of $23.4bn and $40.9bn, respectively.

By contrast, multi-strategy and CTA/managed futures bucked the negative trend to post H1 inflows of $7.9bn and $3.7bn, respectively, supported by investors desire to protect their capital from the poor performance of equities and fixed income in 2022.

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