Total hedge fund assets last year saw their first annual fall since the financial crisis, according to index provider Hedge Fund Research.
Net assets fell by around $100 billion (£76 billion), from $3.2 trillion to $3.1 trillion last year, versus a 2007/8 fall from $1.9 trillion to $1.4 trillion.
The outflows mainly originated with funds which closed and returned cash – while roughly two dozen firms lost more than $500 million in outflows.
The year was also marked by low levels of asset gathering with the fewest fund launches this century, and the second half seeing more liquidations than openings.
An estimated 561 hedge funds launched globally in 2018, down 23.7% from 735 the year before. There were 111 launches in the final quarter, though fund liquidations rose to approximately 215, the highest number since the second quarter of 2017.
It was the second three month period in a row to see more closures than openings, with Q3 and Q4 2018 together seeing the total number of hedge funds drop by 134, calling end to a four quarter trend of net growth in the investment vehicles.
Fewer funds were wound up in 2018 than the year before, however, with 659 funds liquidated compared to 784 in 2017. Over the year, the total number of strategies fell by 58 to 8,331.
HFR president Kenneth J. Heinz said: ‘A steep drop in investor risk tolerance as financial market volatility surged in Q4 inhibited hedge fund launches into year end, resulted in the lowest quarterly launch total since Q4 2008 and lowest annual launch total since 2000.
‘Liquidations also declined in the year, indicating that more investors are remaining with funds in which they are currently invested.’
The HFRI Fund Weighted Composite (FWC) performance index fell 4.75% in 2018, though has since picked up by 4.91% from the start of 2019 as of 21 March.