Negative investor sentiment continues to weigh on the hedge fund industry, with investors pulling US$16.87 billion from the sector in June, market intelligence provider eVestment said in its latest report. If the trend continues or accelerates, full-year redemptions could surpass the US$102.25 billion that left in 2019.

“The last time the industry had aggregate inflows in a quarter was Q1 2018,” says eVestment global head of research Peter Laurelli. “That is nine quarters without new money coming in outpacing money leaving.”

The outflow puts second-quarter redemptions at US$42.4 billion, or US$55.4 billion year to date. The performance brought the industry’s total assets under management to US$3.06 trillion at the end of June.

Among hedge fund types, multi-asset hedge funds were the largest asset losers in June, with investors pulling US$7.26 billion from these funds in June, or US$41.57 billion year YTD.

Long/short equity again faced large redemptions, US$4.65 billion for the month or US$11.05 billion YTD, despite recent returns from some large managers.

Multi-strategy funds also saw redemptions rise to US$3.74 billion in June, or US$4.70 billion YTD. “Probably no other segment of the industry sums up the year as well as multi-strategy funds,” says Laurelli. “The year began with some meaningful interest, then the pandemic came and the negative themes of last year got right back on track.” A few larger managers are doing well this year as they did last year – “success for some, but nowhere near for all”, he notes.

Market neutral equity funds were among the few bright spots among primary strategies eVestment tracks, with investors adding US$1.26 billion to such funds in June. Year to date, however, asset flows were negative with investors pulling US$1.52 billion from such funds.

The only other primary strategies to see inflows in June were managed futures funds, reeling in US$450 million, and convertible arbitrage funds, with US$140 million in new money.

Individual funds of all types continued to see positive asset flows, but as the aggregate data shows, funds gaining assets are generally dwarfed by those losing assets. This highlights for investors interested in hedge funds the importance of due diligence in selecting funds and monitoring once funds have been selected, eVestment says.

For fund managers, the June results highlight investors’ impatience with underperformance. As Laurelli tells fund managers in the report: “Do well and you are likely to be rewarded, do not as well as expected and there will be consequences. Investors do not appear to have much middle ground with regard to their hedge fund allocations.”