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The
outflows were the largest that the $4.1 trillion hedge fund
industry had seen since the start of the coronavirus pandemic in
the first quarter of 2020.
The declines may continue as central banks continue to raise
rates, Preqin said.
In September, central banks in North America and Europe
increased interest rates in order to curb inflation. Meanwhile,
a surge in U.K. government bond yields hit British pension
funds, forcing some to seek emergency funds from the companies
for which they manage money. Bond prices fall when yields rise.
Global uncertainty "put significant pressure on markets and
forced investors to revisit their allocations," the report said.
Lacklustre second quarter returns have not encouraged investors
to stay, either. Returns fell 8.82% in North American-focused
hedge funds whereas their European counterparts fared slightly
better with 5.78% declines. Funds' returns focused in the Asian
Pacific Region fell 4.45%.
Still, most of the outflows were from European-focused hedge
funds, which saw $28.4 billion in the second quarter and $49.2
billion in total for the first half of 2022.
Longer term performance trends in Europe also lagged behind
peers in the United States and the Asia-Pacific (APAC) region.
In the last five years and including the first half of 2022,
funds focused on the U.S. and APAC returned 8.55% and 6.90%,
respectively but European focused hedge funds only managed 3.5%,
the report said.
Now that market stress has returned, hedge funds are poised to
do their best particularly those which use strategies which make
use of macro-economic indicators to trade trends in the markets,
the report said.
(Reporting by Nell MackenzieEditing by Marguerita Choy and
Louise Heavens)
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