LONDON, Dec 13 (Reuters) – Trend-following and niche hedge funds that trade cryptocurrencies and insurance-linked assets attracted most new investor money in the first three quarters of 2023, according to a global report by research firm Preqin on Wednesday.
Hedge funds making use of algorithms to catch market trends, or commodity trading advisors saw $13.1 billion of net cash inflows, Preqin said.
Niche strategies, which make up 2% of the industry (by assets), saw a net $11 billion in inflows during the same time frame, said Preqin.
The global hedge fund industry as a whole only saw about a 5% rise in AUM across all strategies, the report said.
Several different kinds of hedge funds suffered declines in AUM during this time, said Preqin, including stock trading strategies with a net $15 billion of outflows. Event driven strategies, which make money on company debt and M&A deals, saw net outflows of $11 billion.
“Investors are quicker to redeem assets in down markets than they are to commit to hedge funds during rising markets,” said the report.
The last five years saw more money leaving than going into hedge funds in 12 out of 20 quarters, said the report.
The most customer outflows from the past five years occurred between late 2018 and the second quarter of 2020, when customers took a net $205.6 billion out of hedge funds during seven consecutive quarters.
Overall underperformance of hedge funds compared with public markets during this time likely played a role in many institutional allocators reducing their hedge funds exposures, said the report.