By Nell Mackenzie
LONDON (Reuters) - Almost $125 billion worth of assets, from performance losses left the hedge fund industry in 2022, Hedge Fund Research (HFR) data showed on Friday in the latest sign of the havoc that volatility wreaked on the industry last year.
Investors rethought putting their money into hedge funds, leading to a net outflow of $55 billion in assets, making it the largest capital flight from the industry since 2016, HFR said.
A sharp change from 2021, when the industry saw a positive $15 billion of net inflows.
GRAPHIC: Hedge funds net asset flow (https://www.reuters.com/graphics/GLOBAL-HEDGEFUNDS/byprlrdeape/chart.png)
High inflation, aggressive central bank interest rate-hikes and Russia's invasion of Ukraine roiled world markets last year, with investors across asset classes having to navigate a level of volatility not seen in years.
Investors took $40.4 billion out of hedge funds that buy and sell stocks, which is also the strategy that posted the worst performance numbers, losing $112.5 billion.
Despite the combined strong performance of funds which trade on macro-economic indicators, institutional players yanked $15 billion from these funds, the data company said.
The only kind of hedge fund strategy that saw an increase of investor money was the $4.3 billion that flew into event-driven mergers and acquisition and credit funds.
The size of the hedge fund industry grew in the fourth quarter to $3.83 trillion, a quarterly increase of $44 billion, HFR said.
"Strategies which have demonstrated their ability to navigate the current extreme market volatility are likely to attract capital," said Kenneth J. Heinz, president of HFR.
The hedge fund industry faced a difficult period last year amid markets turmoil. Overall, funds fell 4.2%, according to the HFRI 500 Fund Weighted Composite Index, which tracks many of the biggest global hedge fund performances. That was the worst performance since 2018. Hedge funds' return last year was mainly dragged down by equity strategies, which fell 10.21%, but still beat the S&P 500, which tanked 19.4% in its worst year since 2008.