The ANGELA WEISS AFP investors pulled $32 billion from hedge funds in the second quarter of 2022 and were spooked by inflation, geopolitical tensions and the conflict in Ukraine, according to a report from Preqin.
The US $4.1 trillion hedge fund industry had seen the outflows the largest since the start of the coronaviruses epidemic in the first quarter of 2020.
The declines may continue as central banks continue to raise rates, according to Preqin.
In September, central banks in Europe and North America increased interest rates in order to curb inflation. A surge in UK government bond yields hit British pension funds, forcing some to seek emergency funds from companies for which they manage money. According to Lacklustre second quarter returns, investors were not encouraged to stay despite the fact that global uncertainty put significant pressure on markets and forced investors to revisit their allocations. Returns fell 8.82 percent in North American-focused hedge funds compared to their European counterparts, which fell slightly better with 5.78 percent declines. Funds' returns focused on the Asian Pacific Region fell 4.45 percent.
The US $28.4 billion and US $49.2 billion were the main influxes from European-focused hedge funds, which saw US$49.2 billion in the second quarter and US $49.2 billion in the first half of 2022.
Europe's long term performance trends lagged behind peers in the United States and the Asia-Pacific APAC region.
In the last five years, funds focused on the US and APAC returned 8.55 percent and 6.90 percent, but European focused hedge funds only managed 3.5 percent, according to the report.
It said hedge funds are poised to do their best now that market stress has returned and that they use strategies that make use of macroeconomic indicators to trade trends in the markets.