Asset Flows Update

Hedge funds helped investors benefit from the continuing global equity market uptick in November, gaining 1.4% during a promising month that saw the S&P 500 up 5.4%. Encouragingly, hedge fund industry AuM increased after seven consecutive months of decline, climbing by $9.8bn, reducing YTD losses to $198bn. Europe ($16bn) accounted for most of the AuM increase, driven by inflows rather than performance. This was due to improving wider economic prospects. Inflation decreased slightly after a record high of 11% in October and the UK bond market stabilized under a new government. Long/short equity hedge funds continued October’s rally to post AuM growth of $19bn in November, reducing the strategy’s AuM decline to $37.5bn YTD. Macro funds posted the largest AuM decline of $4.5bn in November driven by performance decline as investors sought safe-haven assets amid rising interest rates, US-China friction and a recessionary macroeconomic environment.

Asset flows data since January 2021

Key highlights for November 2022:

  • Hedge fund industry AuM increased by $9.8bn in November, the first positive month since March. The industry saw the largest net inflows of 2022 ($9.9bn), and performance-based losses were minimal at $0.2bn.
  • By strategy, fixed income recorded the largest ($0.4bn) outflows in November as record-high inflation and interest rates in multiple geographic regions harmed yields, making them less attractive for allocations as a diversifier within investment portfolios. In contrast to early 2022, long/short equity saw inflows of $10bn and a significant uptick in performance of $8.9bn. Investors are now less worried about monetary tightening from central banks after the steep equity downturn earlier in the quarter.
  • North America ($3.3bn) was the region with the biggest outflows as investors continued to preserve their capital after the sharp downturn in equity markets in September.
  • YTD industry AuM decline stood at $198bn in November driven by $55bn of performance-based decline and $143bn of net outflows.

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