Over $100 Billion Redeemed From Hedge Funds In 2016 As Only 32% Outperform Their Benchmark

Two months ago, when looking at the monthly Evestment hedge fund fund flow report, we reported that investors had redeemed a net $14.2 billion from the industry in October, the fourth consecutive month of redemptions, bringing Year-to-date HF outflows to a net $77 billion removed from the industry. The breadth of redemption pressure in October was the industry’s largest in 2016 with 61% of reporting funds estimated to have net outflow during the month. Two months later it has only gotten worse, but before we get into the details, here is a quick summary of just why, courtesy of JPMorgan.
As JPM’s equity strategist explains in a note summarizing active manager performance, 2016 was one of the most challenging years for active equity managers with only 32% of fundamental and quantitative funds outperforming their benchmarks. JPM estimates that large cap U. S. fundamental managers underperformed by a median 33 bp before fees, with Value managers outperforming ( 0.77 bp vs. benchmark) and Growth managers underperforming (-79 bp vs. benchmark).

This post was published at Zero Hedge on Jan 18, 2017.