Data from Hedge Fund Research (HFR) has revealed the latest indication of the devastation that volatility wrought on the sector last year: around $125 billion worth of assets from performance losses exited the hedge fund industry in 2022.
HFR said that the industry experienced its highest capital flight since 2016 as a result of investors rethinking investing in hedge funds, which resulted in a net outflow of $55 billion in assets.
This was a significant departure from 2021, when the sector experienced net inflows of $15 billion in the positive.
Last year’s global market turmoil was caused by high inflation, aggressive central bank interest rate hikes, and Russia’s invasion of Ukraine. Investors across all asset classes had to deal with levels of volatility that had not been seen in years.
Stock-buying and stock-selling hedge funds saw $40.4 billion taken out of them by investors; this was the approach with the lowest performance figures, losing $112.5 billion.
Institutional investors withdrew $15 billion from funds that trade on macroeconomic indicators despite their overall outstanding performance, the data provider claimed.
The only type of hedge fund strategy to see an increase in investor capital was event-driven credit and mergers and acquisitions funds, which received $4.3 billion in capital.
According to HFR, the hedge fund market reached $3.83 trillion in the fourth quarter, up $44 billion over the previous quarter.