By Nell Mackenzie
LONDON (Reuters) – The hedge fund industry saw a net $80 billion of outflows for the year to Oct. 18, even as it raked in net profits of about $119 billion, hedge fund specialist Aurum Funds said in a report on Wednesday, as investors looked for higher returns elsewhere.
Multi-strategy hedge funds did the best, posting a positive 5.9% return so far this year, just ahead of credit hedge funds with a positive 5.6% return, Aurum said.
But investors may have been tempted away by rising bond yields, said Don Steinbrugge, founder and chief executive of Agecroft Partners, a hedge fund consulting firm.
“In addition, there has been has been a lot of assets flowing to private credit,” he added.
The 10-year yield on U.S. government bonds has risen 146 basis points in the six months up to Nov. 1.
Money flowing out of hedge funds was a sign that the industry was reaching maturity, family office investor Michael Oliver Weinberg told Reuters.
“Future growth will likely come from private wealth offsetting negative growth from institutional investors,” he said.
“Even then, for tax paying private wealth, hedge funds are typically less tax efficient than strategies such as private equity, so this is an inherent ‘brake’ on the growth in the industry,” he added.
Hedge fund strategies with mostly long trades betting equities would rise fared the worst with average returns of positive 2% for the year, the Aurum report said.
It tracked 3,402 funds with a total of $2.9 trillion worth of assets under management.
(This story has been corrected to read that long biased hedge funds have a positive 2% return YTD, not negative, in paragraph 9)
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Andrew Heavens)