Hedge Funds Lately Experienced the Biggest Quarterly Withdrawals

In Q1, 2020, investors withdrew a net US$33 billion from hedge funds, the highest level in more than 10 years. According to a report released by Hedge Fund Research Inc. on Wednesday, this is the largest quarterly outflow of funds since investors withdrew approximately US$42 billion in the second quarter of 2009. To put things in perspective, investors withdrew US$43.1 billion throughout the whole year of 2019.

Renaissance Technology, an IT-driven hedge fund founded by Jim Simons, recorded one of the worst quarterly performances. Investors said the company's Renaissance Institutional Equity Fund fell nearly 18% in the first three months of this year, while the Renaissance Institutional Diversified Alpha Fund fell 13%. According to investors, Dario s Bridgewater Fund also missed in the market sell-off, and its flagship fund Pure Alpha shrank by about a fifth in asset value in the first quarter.

Investors have reacted unprecedentedly to the volatility and uncertainty caused by the global epidemic, and the historical collapse of investor risk tolerance has led to the largest quarterly capital redemption in the hedge fund industry since the financial crisis. Overall, the investment value of hedge funds fell by US$333 billion in the first quarter, reflecting the stock market sell-off and widening credit spreads. Due to this round of decline driven by poor performance, the total hedge fund assets have fallen below US$3 trillion for the first time since 2016.