Hedge fund redemptions outpaced new investments in October, but performance gains by many large funds left total assets unchanged at $3 trillion, according to a new report from eVestment, published Wednesday.
The $2.9 billion outflow in October was the second consecutive month of negative investor flows, the first time this has happened since mid-2012 during the European sovereign crisis.
According to eVestment, investor sentiment toward equity strategies was negative in September and October following a 14-month positive trend. Equity strategies experienced a combined $6 billion net outflow for the two months, after having taken in $106 billion since June 2013.
Equity strategies produced a negative 0.8% return for the last three months. They are up 1.9% for the year, after returning 15.7% in 2013.
The report said recent volatility was only one reason for October redemptions from equity hedge funds.
The majority of last month’s redemptions came from funds with elevated losses in June and July. Several of these then performed well in October and even in September’s volatile environment, but by then redemption decisions appear to have been solidified.
Given that losses were elevated elsewhere across the hedge fund sector in September and October, redemption pressure may persist for equity strategies into year-end, eVestment said.
The report said investor withdrawals from credit funds surpassed new allocations in October, apparently prompted by a three-month asset-weighted performance decline of 1.7%, which was preceded by one month of flat returns. Credit strategies are up 2% for the year.