Assets Under Management Fall for Hedge Funds

According to eVestment LLC, investors in hedge funds and hedge funds of funds withdrew $30.8 billion in the first half of 2016, bringing down the total assets under management to $3 trillion for the entire industry.  Poor performance seems to be the driver for the redemptions.  The HFRI Fund Weighted Composite index fell 2.4% during the same timeframe.  Momentum investors, who search for "the latest hot hedge fund performer", have nothing to invest in.  Kenneth J. Heinz, president, Hedge Fund Research Inc., said that investors are also re-allocating assets due to a change in tactical or strategic investing strategy or even re-balancing assets.

The usual suspects comprised the list of the largest hedge fund managers:  Bridgewater, AQR Capital Management and Man Group.  Several managers were off the list because of divestitures (J.P. Morgan Asset Management), non-responsiveness to the survey (Davidson Kempner Capital Management, Appaloosa, Pershing Square Capital Management, Paulson & Co. and Third Point) and spin-offs (Black River Asset Management).

The same was evident in the list of hedge funds of funds manager:  Blackstone Alternative Asset Management, UBS Hedge Fund Solutions and Goldman Sachs Asset Management.  There were a couple of deals (Entrust Capital Management and Permal Group) and (Aberdeen Asset Management and Arden Asset Management) that changed the rankings of the biggest managers.  The first merger was a response to competition from investment consultants.  The strategy is to "offer specialized, unique, niche-y strategies" according to Gregg Hymowitz, chairman and CEO of EnTrustPermal.

For the first half of 2016, 58% of hedge fund managers and 63% of hedge fund of fund managers had a decline in assets under management.  Investors dissatisfaction continues as they have become increasingly focused on short term performance.

The source for this article can be found here.