Withdrawals from hedge funds

Wed, 09/11/2024

by Ellie LeTu

Source: Financial Times, WSJ

• Outflows in hedge funds investing

  • Investors have withdrawn $30B from multi-managed hedge funds since June.

  • The first outflow since 2016.

  • Goldman Sachs suspected that pension funds reallocate to other investments due to lower demand.

• Hedge funds investment

  • Consists of firms with hundreds of trading team such as Citadel, Millennium.

  • Involves management fee from 3 to 10% of assets.

  • Promises high returns even in bear markets by using multiple trading strategies.

    • Ex: hedge funds outperformed other investments in the bear market of 2022.

• Struggling performance in the past year

  • A wide performance gap has emerged between top and bottom hedge funds.

  • Top firm Citadel returned 9.9% this year, lower than its usual 15-38%.

  • Firms like ExodusPoint cannot charge management fee until their returns exceed the three-month U.S. Treasury interest rate.