Market Overview

Hedge Funds Are Still Very Much Alive

Hedge Funds Are Still Very Much Alive

Investors withdrew more than $25 billion last month from hedge funds at a time when many insiders are claiming the industry is "under assault."

According to Bloomberg Gadfly's Christopher Langner, the mass exodus of customers out of hedge funds is not a sign that the industry is dying, but it is shrinking.

Langner noted that July's redemption data are the worst in terms of redemptions since February 2009, and they are slightly above June's total net outflow of $23.5 billion.

Related Link: Leon Cooperman Thinks The Hedge Fund Industry Is Under Attack

However, he pointed out the hedge fund industry manages a staggering $2.7 trillion, making this year's total redemptions of $55.9 billion look like "a drop in the ocean."

Langner continued that there has been a strong inflow to hedge funds since 2009, so it is only "natural" that investors are taking money off the table. Also, commodity related hedge funds continue to attract new money this year and has seen a total net inflow of $10.3 billion over the past 14 months.

"Those two facts seem to support the idea that the latest move is more of an adjustment than a final breath for the industry," Langner stated. "The majority of redemptions happened among money-losing funds, and inflows were recorded for those that gained more than 7 percent this year."

Bottom line, it will take "dozens of bad months like July" before the hedge fund industry faces any sort of threat to its existence. It is, however, a good time for hedge fund managers to "rethink their ways."

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