By Nell Mackenzie
LONDON (Reuters) -Investors withdrew over $100 billion from hedge funds last year in a second consecutive year of outflows of this scale, according to a Nasdaq eVestment report on Tuesday, against a backdrop of volatile markets and changing investor preferences.
In December alone, investors removed roughly $26 billion from hedge funds, the largest monthly amount in 2023. This tipped the total outflows for last year to $103 billion, compared to $112 billion in 2022, said the report.
The outflows point to an interplay of different factors influencing investor decisions, said Bruno Schneller, a managing director at INVICO Asset Management.
“Market volatility, geopolitical tensions, and a shift in investor preference towards more liquid and transparent assets amidst global economic uncertainties have played pivotal roles,” he said.
The decline in outflows in 2023 from the previous year indicated a “nuanced investor response” to the changing global economy, he added.
However, the industry has still grown, the Nasdaq eVestment report showed.
Hedge fund assets (which combines investor money, leverage and performance growth) has increased in four of the last five years, said the report.
The hedge fund industry assets under management (AUM) rose in 2023 to an estimated $3.5 trillion, up 3.2% from the year before, the report said.
Over the last five years, the industry grew at an annualized rate of about 2%, which includes the 6.5% AUM decline in 2022, the report said.
Hedge funds trading value differences between bonds raked in $4 billion in 2023, the highest hedge fund strategy inflows and a notable jump from the $5.5 billion those funds saw withdrawn in 2022, said Nasdaq eVestment.
Hedge funds taking bets on stocks saw an estimated $35 billion withdrawn for the year, the highest strategy outflows in 2023.
Event-driven hedge funds which often trade off of mergers and acquisitions deals saw a $25 billion of outflows last year, said Nasdaq eVestment.
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Ros Russell)