Investors redeemed $22.5 billion from hedge funds during the volatile fourth quarter of 2018, making it the largest quarterly outflow since the third quarter of 2016, according to the HFR Global Hedge Fund Industry Report.
Total hedge fund capital under management now sits at $3.11 trillion, down from the record $3.24 trillion set during the third quarter. The estimated $22.5 billion in redemptions during the quarter represents about 0.7% of total industry AUM.
Some hedge funds were hit harder than others. According to HFR, about two dozen hedge funds experienced outflows greater than $500 million during the fourth quarter.
Most of the capital was pulled from equity hedge funds with approximately $16.8 billion exiting that strategy. On average, equity hedge funds' performance fell 8.3% during the fourth quarter, bringing their average full-year performance to -6.9%, according to the HFRI Equity Hedge (Total) Index.
The pain of some hedge funds was another's gain. About one dozen hedge funds saw net inflows of greater than $500 million during that period.
Event-driven funds, particularly those that focus on distressed/restructuring, saw inflows. Event-driven funds, in aggregate, fell 2.35% in 2018.
Hedge funds, on aggregate, declined 5.76% in the fourth quarter, according to the HFRI Fund Weighted Composite Index. The index fell 1.97% in December alone, outperforming the stock market. For the full year of 2018, the HFRI Fund Weighted Composite Index returned -4.07%.
In 2018, more than than $34 billion was pulled from hedge funds, representing about 1% of total AUM, according to the report.
HFR follows nearly 7,000 hedge funds. Some estimates put the total number of hedge funds at around 10,000 to 15,000. Hedge funds employ a variety of different strategies, from long-short equity to global macro to event-driven, etc.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.