Hedge fund industry lost $125B worth of assets in 2022
Industry saw a positive $15B of net inflows in 2021
Kenny Polcari: People should have more cash on hand due to volatility
Slatestone Wealth chief market strategist Kenny Polari provides insight on how investors should respond to market volatility on 'Making Money.'
Almost $125 billion worth of assets, from performance losses and asset flows, left the hedge fund industry in 2022, Hedge Fund Research (HFR) data showed on Friday in the latest sign of the havoc that volatility wreaked on the industry last year.
Investors rethought putting their money into hedge funds, leading to a net outflow of $55 billion in assets, making it the largest capital flight from the industry since 2016, HFR said.
A sharp change from 2021, when the industry saw a positive $15 billion of net inflows.
People look at Luke Jerram's 'Floating Earth', an installation as part of the Canary Wharf Winter Lights festival in the financial district in London, Britain, January 17, 2023. REUTERS/Kevin Coombs/File Photo (Reuters Photos)
High inflation, aggressive central bank interest rate-hikes and Russia's invasion of Ukraine roiled world markets last year, with investors across asset classes having to navigate a level of volatility not seen in years.
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Investors took $40.4 billion out of hedge funds that buy and sell stocks, which is also the strategy that posted the worst performance numbers, losing $112.5 billion.
Despite the combined strong performance of funds which trade on macro-economic indicators, institutional players yanked $15 billion from these funds, the data company said.
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Ray Dalio, Bridgewater's co-chairman and co-chief investment officer, speaks during the Skybridge Capital SALT New York 2021 conference in New York City, U.S., September 15, 2021. REUTERS/Brendan McDermid | Reuters
The only kind of hedge fund strategy that saw an increase of investor money was the $4.3 billion that flew into event-driven mergers and acquisition and credit funds.
The size of the hedge fund industry grew in the fourth quarter to $3.83 trillion, a quarterly increase of $44 billion, HFR said.
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"Strategies which have demonstrated their ability to navigate the current extreme market volatility are likely to attract capital," said Kenneth J. Heinz, president of HFR.