(Reuters) – Investors pulled $32 billion from hedge funds within the second quarter of 2022, spooked by inflation, geopolitical tensions and the war in Ukraine, in keeping with a report from data provider Preqin.
The outflows were the biggest that the $4.1 trillion hedge fund industry had seen for the reason that start of the coronavirus pandemic in the primary quarter of 2020.
The declines may proceed as central banks proceed to lift rates, Preqin said.
    In September, central banks in North America and Europe increased rates of interest as a way to curb inflation. Meanwhile, a surge in U.K. government bond yields hit British pension funds, forcing some to hunt emergency funds from the businesses for which they manage money. Bond prices fall when yields rise.
    Global uncertainty “put significant pressure on markets and compelled investors to revisit their allocations,” the report said.
    Lacklustre second quarter returns haven’t encouraged investors to remain, either. Returns fell 8.82% in North American-focused hedge funds whereas their European counterparts fared barely higher with 5.78% declines. Funds’ returns focused within the Asian Pacific Region fell 4.45%.
    Still, many of the outflows were from European-focused hedge funds, which saw $28.4 billion within the second quarter and $49.2 billion in total for the primary half of 2022.
    Long run performance trends in Europe also lagged behind peers in the USA and the Asia-Pacific (APAC) region.
Within the last five years and including the primary half of 2022, funds focused on the U.S. and APAC returned 8.55% and 6.90%, respectively but European focused hedge funds only managed 3.5%, the report said.
    Now that market stress has returned, hedge funds are poised to do their best particularly those which use strategies which make use of macro-economic indicators to trade trends within the markets, the report said.
(Reporting by Nell Mackenzie; Editing by Marguerita Choy)
Copyright 2022 Thomson Reuters.
