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Still, no matter how one slices it, the industry continues to face aggregate negative investor sentiment. Investors continued to redeem from equity-focused strategies and the recent pillars of support, multi-strategy and managed futures, have each faced some headwinds.

In a typical year, most meaningful allocations to hedge funds tend to show up in the first half of the year's data. With that in mind, it is extremely likely that 2023 will be another year of net outflows for the industry, though redemptions will likely not be as large as those in 2022.

Investors removed an estimated net $13.12 billion from hedge funds in June. Performance accounted for an increase in assets. The result of both factors was a $39.5 billion increase in assets to an estimated $3.439 trillion.

June tends to be a heavy redemption month, but net outflows in June 2023 were lighter than recent years

In each of the last seven years, reported data for June has indicated investors have used the mid-year point to remove assets from the industry. In the prior four years, investors have removed an average of just over $18 billion, including over $23 billion in 2022, which makes the $13 billion removed in June 2023 better than recent history. While that is positive, June's net outflow was the industry's 13th consecutive month of redemptions.

The volume of asset movement in the industry was elevated in June and new net inflows were broadly dispersed

The volume of net flow is a measure of investor activity during a month. The absolute value of product-level net flow in June 2023 was larger than it had been in either of the prior two Junes. Additionally, the bulk of what inflows there were in June 2023 were spread more broadly than they have been in recent months. These two metrics together, along with data indicating net outflows were lower than comparable prior months implies that while redemptions did outpace inflows in June 2023, there were some meaningful dollars coming in and those allocations were more widely dispersed across the industry compared to what we were seeing when redemption pressures resumed in 2022.

Investors used the mid-year redemption period to remove some assets from multi-strategy products.

There were a handful of large redemptions within the multi-strategy segment in June which weighed on the strategy's aggregate net flow picture during the month. Reported data indicated a similar, though larger, chunk of redemptions occurred in December 2022. Despite these outflows in June, net flow for the year remained positive. After relatively good returns in the difficult environment covering most of 2022, the largest multi-strategy managers continue to outperform most subsets of the hedge fund industry in 2023.

Allocations returned to managed futures products

After two consecutive months of redemptions from managed futures products through May 2023 following some elevated performance losses in both March 2023 and November 2022, there was a question mark on investor sentiment to the strategy. June's net inflow, while not erasing concern, is a positive indication that investor sentiment maintains some positive momentum.

Investors continued to redeem from equity-focused exposures impacting both long/short equity and event driven funds in June.

Event driven products, along with long/short equity, continued to face pressure from investors through June. The two segments have seen a net of over $30 billion removed in the first half of 2023. For the year, nearly 70% of long/short equity managers' data indicates net outflows, while only half of the event driven space appears to be dealing with negative investor sentiment. While global equity markets have been rebounding in 2023, returns from the largest long/short equity products have been leaders among the hedge fund industry. The largest event driven managers, however, have produced mixed returns, though some of the segment's very largest managers are producing excellent returns in 2023.

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