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Despite the relative outperformance, hedge fund industry AUM declined for the sixth consecutive month, falling $36.8bn, which extended the YTD decline to $178bn. Europe ($18.7bn) accounted for most of the AUM decline, driven by rising risk-off sentiment as the European Central Bank moved to raise interest rates by 75bps to combat soaring inflation, which hit a record high of 10% in September.

By strategy, long/short equity hedge funds posted the largest AUM decline of $16.5bn, driven by net outflows of $8.1bn as investors seek safe-haven assets amid rising interest rates and a bearish stock market. CTA/managed futures hedge funds bucked the overall negative trend to post an AUM growth of $3.3bn as performance-based growth remained resilient at $3.7bn despite the challenging market conditions.

Asian hedge funds AUM tumbled by $13.5bn

Asian hedge funds got off to a bad start in Q1 2020. AUM tumbled by $13.5bn as the onset of the pandemic forced government authorities to impose restrictive lockdowns, triggering an equity market sell-off that saw the CSI 300 and Hang Seng indices declines by 10.0% and 16.3%, respectively, in Q1 2020. But supported by accommodating fiscal policies and the rapid rollout of vaccines, the industry went on to record six consecutive quarters of AUM growth totaling $47bn, marking a new record-high AUM of $486bn as of the end of Q3 2021.

But the positive momentum did not last beyond Q3 2021. The emergence of the Omicron variant in November 2021, China's property crisis and the outbreak of war between Russia and Ukraine led to heightened risk aversion among market participants.

Additionally, China's adherence to a zero-Covid policy has compelled the Chinese government to reimpose lockdowns in major cities, severely affecting economic activity in the country. As of the end of August 2022, the Asian hedge fund industry has recorded an AUM decline of $14bn YTD and currently stands at $470bn.

Hedge fund industry AUM declined by $36.8bn in September, the sixth consecutive month of decline. The industry recorded $16bn of performance-based losses and $20.7bn of net outflows.

By strategy, long/short equity ($8.1bn) posted the largest outflows in September, as global central banks remained committed to further monetary policy tightening until price stability recovers. By contrast, CTA/managed futures funds recorded a much smaller net outflow in September of $0.4bn due to their low correlation to equities and fixed income, which makes them an excellent diversifier within investment portfolios.

Most hedge fund strategies have struggled to attract net inflows in 2022 amid the challenging market environment. Arbitrage/relative value has fared best YTD, with 45% of funds managing to attract net inflows, whereas only 28% of fixed income hedge funds attracted net inflows in the same period.

North America ($11bn) and Europe ($6.3bn) accounted for most outflows as investors in the two regions sought to preserve their capital after the sharp equity market downturn in September.

As of the end of August, the Asian hedge fund industry has recorded an AUM decline of $14bn YTD and currently stands at $470bn. Since December 1999, the Eurekahedge Asian Hedge Fund Index has generated an annualized return of 7.5%.

Around 53% of active Asian hedge funds have a track record of at least 12 years. Only around 8% of hedge funds survive more than 20 years.