Investors may pull as much as $100 billion from the hedge fund industry this year, as a result of the economic fallout from the coronavirus crisis.
The outflows -- which may range from $50 billion to $100 billion -- would mark the largest drawdown since the global financial crisis, when the industry saw $154 billion in withdrawals in 2008, according to a Barclays Capital Solutions report.
“We’re already $30 billion in -- in terms of redemptions,” Kate Holleran, managing director of capital solutions at Barclays, said in a telephone interview. “We were optimistic coming into this year, given the strength of 2019, that we might actually see inflows. That is clearly not going to be the case.”
The year fell into chaos as Covid-19 became a global pandemic, seizing up credit markets and putting an end to Wall Street’s longest-ever bull market. The damage pushed the Federal Reserve to intervene, flooding the markets with trillions of dollars in stimulus. That effort, combined with the easing of lockdown restrictions across the U.S. and rising hopes of a quick economic recovery, helped the S&P 500 index soar from its March low.
With markets defying the initial gloomy expectations, Holleran believes redemptions will likely come in at the lower end of the range.
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