A news release said third-quarter performance losses accounted for $348 billion of the reduction and investor redemptions and liquidations accounted for an additional $128 billion outflow. Investor redemptions alone accounted for an estimated $117.3 billion outflow, by far the largest on record, the company said.
Among other third-quarter asset flow trends, according to the announcement:
- net hedge fund liquidations of $10.9 billion resulted in a contraction of total hedge fund assets of $475.7 billion in the quarter, the largest dollar value change, up or down, on record for the industry.
- some$134.5 billion in fund of hedge fund performance losses, $75.7 billion of investor redemptions, and $4.3 billion in net liquidations resulted in total assets falling 14.9% in the third quarter to an estimated $1.2 trillion, the first ever quarterly reduction in fund of fund assets on record.
In terms of the performance of different strategies, HedgeFund.net said:
- corporate bond strategies attracted a significant amount of assets in the quarters leading up to third quarter, but total assets in these funds dropped 15.1% during the quarter to an estimated $294.6 billion. Performance losses, estimated at $54.1 billion, accounted for the majority of the asset reduction. Investor redemptions reduced assets $7.5 billion, 2.1%, which is relatively low compared to other strategies.
- long/short equityhedge fund assets fell an estimated $147.8 billion, 19.2%, to $621.8 billion. Estimated performance losses were $94.6 billion. Redemptions of $52.2 billion made the third quarter the third consecutive quarter of investor redemptions from the equity based strategy.
- Emerging marketsdedicated hedge fund assets fell an estimated $84.3 billion in the third quarter, 26.1%, to $239 billion. Performance losses of $68.7 billion and redemptions of $16 billion were both quarterly records.
- Distressedinvesting strategies saw total assets fall an estimated $62.8 billion, 22.8%, in Q3 to $212.6 billion. Performance losses caused the lion’s share of the reduction: $57.1 billion. Through the first three quarters of 2008, investors have actually added an estimated $11 billion more than they have withdrawn to distressed investing hedge fund strategies.
Early October estimates show the HFN Hedge Fund Aggregate Average, an equal weighted benchmark of all single manager hedge funds and CTA/managed futures products in the HedgeFund.net database, was -3.85% in October and -12.44% year to date.