Hedge funds worldwide have seen the worst quarterly outflows in more than a decade since instability and stock turmoil forced assets to slip amid the COVID-19 pandemic.
According to the Hedge Fund Research group (HFR), investors have withdrawn approximately $33 billion from hedge funds between January and March of this year, making this quarter the industry’s fourth-highest outflow in its history and the worst since the 2009 financial crisis.
Head of Hedge Fund Research (HFR), Kenneth Heinz, stated in the report that investors responded to the unprecedented surge in volatility and uncertainty driven by the global coronavirus pandemic with a historic collapse in investor risk tolerance and the hedge fund industry’s largest redemption since the financial crisis.
Widening Credit Spreads And Equity Sales To Blame
According to investors, Jim Simons’ computer-driven hedge fund, Renaissance Technologies, has suffered one of the worst-ever quarters.
The Renaissance Technology Institutional Equities fund decreased by almost 18% between January and March of this year, while the Institutional Diversified Alpha fund decreased by 13 percent.
The overall volume of hedge fund investments fell by an overall of $333 billion in the first quarter of the year, reflecting the rise in credit spreads and the selling of equities.
This downturn has led to a decrease in the company’s overall assets, which has been limited to less than $3 trillion for the first time in four years.
Markets Continue To Decline Amid Government Assistance
Even though there are attempts by the US Federal Reserve to introduce relief measures to boost markets on the downturn, there has been little impact on calming investor concerns of an impending economic recession, and financial prices have seen their largest decline since 1987.
There has been a small turnaround in financial markets in April, but investors remain wary as unemployment levels increase due to global attempts to stop the spread of the COVID-19 pandemic.
Macro hedge funds have suffered the biggest outflows, accounting for almost two-thirds of the overall outflow.