In the third quarter of 2015, hedge funds, as a category, were experiencing their worst quarter of flows since the bottom of the financial crisis six years before. There were an avalanche of stories about the industry's nearly systematic underperformance. It looked and felt like an inflection point.
At the time, I asked aloud whether it could mean an actual net outflow at some point — an improbable musing given the seemingly one-way stampede through the in-door. Turns out, we all underestimated what would turn into a profound sea change in investor attitudes around the country.
One by one, the public retirement systems of various states and the endowments of universities made it clear that they were rethinking hedge funds for the first time since David Swensen's revolutionary Yale Endowment model took the world by storm. Some announced their commitment to alternatives but mentioned that they would be lightening up their exposure. Others decreed that a wholesale retreat was coming, with redemptions across the board.
And now, it appears the wave is finally crashing upon the beach.
Virtually every "name brand" hedge fund is facing redemptions to the tune of billions of dollars. The retirements of industry legends as well as the wind-down of once invincible firms make the news on a regular basis.