Net outflows from hedge funds in 2020 are expected to be about $20 billion, according to a study by Goldman Sachs that in December surveyed 444 allocators advising more than $1 trillion in assets. The bulk of the outflows are expected to come from pension funds, endowments, and family offices, according to the report.
In the last five years, hedge funds have underperformed a traditional 60/40 equity bond allocation for the first time since 1990, according to the report. Investors have dumped the funds in favor of cheaper investment vehicles taking advantage of the record bull market run. Underperformance has changed the hedge fund landscape, according to the report. "Many allocators now focus primarily on the diversification benefits of hedge funds," Goldman Sachs wrote in the report. They're taking a very nuanced, surgical approach to the way they invest in hedge funds and are no longer considering them homogeneous asset classes, according to the report.
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