Investors withdrew $40bln from HFs in October

Date: Friday, November 21, 2008
Author: HFR Report

HFR report: Investors withdrew $40bln from HFs (including $22bln from FoHFs) in October, industry AUM down to $1.56tln.

 Investors redeem from underperforming Funds of Hedge Funds; Short Selling, Macro continue to post strong gains
The global financial and economic crises accelerated in October, contributing to continued losses in the hedge fund industry, with the HFRI Fund Weighted Composite Index falling nearly 6 percent for the month, according to data released today by Hedge Fund Research (HFR). The Composite has declined over 16 percent year-to-date through October and has lost more than 12 percent since September 1st.

Investors withdrew over $40 billion from hedge funds in the month of October which, in addition to $115 billion in performance-based asset losses, reduced the industry capital base by $155 billion. Assets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of Q4 2006. October losses follow a challenging third quarter during which global hedge fund capital fell by $210 billion.

Investors withdrew capital broadly across Equity Hedge, Event Driven, Relative Value and Macro strategies; each of these four main hedge fund strategies has now experienced net investor withdrawals for 2008. In October, investors withdrew almost $11 billion from Macro strategies despite a performance gain of over four percent year-to-date through the end of the month; the S&P 500 has declined more than 35 percent over the same period.

The largest capital reductions during the month came from Funds of Hedge Funds, from which investors withdrew over $22 billion. Funds of Hedge Funds have underperformed the overall industry so far this year, with the HFRI Fund of Funds Index posting an 18.50 percent decline, compared to a loss of 16 percent for the HFRI Fund Weighted Composite Index.

Also included in the HFR Global Hedge Fund Industry Report: Special Edition:
• Performance losses were most significant in funds focused on Emerging Markets, Relative Value Arbitrage and Energy/Basic Materials equities.
• Short Selling has posted a strong gain of over 22 percent for the year. Macro Systematic strategies, which employ quantitative trend-following programs, gained over 6.5 percent in October and nearly 15 percent year to date
• Fifty-two percent of October capital outflows were from firms with greater than $5 billion under management; these largest funds represent only 5.5 percent of the number of funds in the industry but control over 58 percent of all hedge fund capital.

Link: http://www.hedgefundresearch.com/index.php?fuse=products