According to Reuters, data analysis company Preqin reported that hedge funds have underperformed public markets over the past five years, leading to capital outflows. However, in the first three quarters of 2023, hedge funds specializing in trading cryptocurrencies and insurance-related assets have become the focus of investment attention and attracted net capital inflows.
According to the report released by investment data company Preqin, hedge funds specializing in tracking trends and niche hedge funds that trade cryptocurrencies and insurance-related assets have become the focus of investment attention in the first three quarters of 2023, attracting a large amount of new capital.
The report pointed out that trend-tracking hedge funds using algorithms to capture market trends received a net inflow of $13.1 billion. Meanwhile, niche strategies in the hedge fund industry also received a net inflow of $11 billion.
Although they have attracted new capital, it has not been able to prevent capital outflows.
From the above, it can be understood that hedge funds specializing in trading cryptocurrencies and insurance-related assets have attracted a large amount of new capital. However, compared to the overall growth of the hedge fund industry’s assets under management, it has been relatively limited, with only a 5% increase overall.
Compared to the growth in capital, these hedge fund strategies have experienced outflows. The trading strategy for stocks saw a net outflow of $15 billion, and event-driven strategies relying on corporate debt and mergers and acquisitions also saw a net outflow of $11 billion.
Over the past five years, hedge fund investors have tended to withdraw capital quickly during market downturns. In 12 out of 20 quarters in the past five years, hedge funds experienced net outflows, according to Preqin’s report.
In particular, from the end of 2018 to Q2 2020, hedge funds experienced significant client withdrawals, with a cumulative net outflow of up to $205.6 billion. Preqin’s report analyzed that the underperformance of hedge funds compared to public markets during this period may be a major reason for many investors reducing their investments in hedge funds.
In the first three quarters of 2023, the inflow of new capital into cryptocurrencies and insurance-related assets has helped these hedge funds regain some vitality.