More than 80% of investors in hedge funds pulled money in the first half of the year, and 61% said they will probably make withdrawals later this year, a Credit Suisse study has revealed.
Redemptions in the first half of the year were selective and targeted at specific funds, rather than reducing exposure to the industry as a whole — over 60% of those who redeemed were driven by specific manager underperformance or an individual fund’s strategy drift.
According to the survey, which polled more than 200 allocators with almost $700bn invested in hedge funds, 11% of investors attributed redemptions to changes in their asset allocation model, while only 9% said that they were a result of disappointment with the performance of their hedge fund portfolios in general.
While 91% of funds-of-funds and 87% of family offices surveyed redeemed from managers in H1 this year, some institutional investors, such as pension funds and endowments, had lower rates of redemptions than the average: 31% of pension funds surveyed had no redemptions, and 25% of endowments and foundations reported no redemption activity during the first half of the year.
Of those investors who did redeem from hedge funds during the first half of the year, 82% expect to recycle that capital to other hedge fund managers rather than other asset classes. Only 9% reported being undecided as to where to allocate the recycled capital.
Future allocations will be driven by strategy or manager performance (60%), or continued outperformance of current hedge fund allocations (12%). The top three most popular strategies being considered for second half allocations are Equity Long/Short, Equity Market Neutral and Global Macro.