Investors withdraw over $100 bn from hedge funds in 2023: Nasdaq eVestment

Hedge Funds: Investors withdrew over $100 billion from hedge funds last year in a second consecutive year of outflows of this scale, according to a Nasdaq eVestment report.

In December alone, investors removed roughly $26 billion from hedge funds, the largest monthly amount in 2023.

This tipped the total outflows for last year to $103 billion, compared to $112 billion in 2022, said the report.

The outflows point to an interplay of different factors influencing investor decisions, said Bruno Schneller, Managing Director at INVICO Asset Management.

"Market volatility, geopolitical tensions, and a shift in investor preference towards more liquid and transparent assets amidst global economic uncertainties have played pivotal roles," he said.

The decline in outflows in 2023 from the previous year indicated a "nuanced investor response" to the changing global economy, he added.

However, the industry has still grown, as per the Nasdaq eVestment report.

Hedge fund assets, which combine investor money, leverage and performance growth, have increased in four of the last five years, it said.

The hedge fund industry assets under management (AUM) rose in 2023 to an estimated $3.5 trillion, up 3.2 per cent from the year before, it added.

Over the last five years, the industry grew at an annualized rate of about 2 per cent, which includes the 6.5 per cent AUM decline in 2022, the report said.

Hedge funds trading value differences between bonds raked in $4 billion in 2023, the highest hedge fund strategy inflows and a notable jump from the $5.5 billion those funds saw withdrawn in 2022, said Nasdaq eVestment.

Hedge funds taking bets on stocks saw an estimated $35 billion withdrawn for the year, the highest strategy outflows in 2023.

The event-driven hedge funds which often trade off of mergers and acquisitions deals saw $25 billion of outflows last year, said Nasdaq eVestment.