Global hedge fund redemptions continue for a second straight month, but some strategies saw inflows

Tuesday, June 18, 2019

Industry Update – The pace of hedge fund redemptions slowed in April but continued for a second straight month with $9.4 billion in net outflows worldwide, down from $11.0 billion in March. Despite the outflows, industry assets under management increased to more than $3.09 trillion due to $33.6 billion of trading profits for the month.
April redemptions represented 0.3% of hedge fund industry assets, according to the Barclay Fund Flow Indicator, published by BarclayHedge, a division of Backstop Solutions.

Recession fears stoked by an inverted yield curve, threats of escalation in the U.S.-China trade dispute and ongoing uncertainty over the U.K.’s Brexit outcome and its subsequent fallout all contributed to April’s redemptions.

Data from the nearly 6,000 hedge funds (excluding CTAs) included in the BarclayHedge database showed flow activity mixed among regions of the world in April, with several actually experiencing net inflows. The lion’s share of April redemptions included $6.3 billion in redemptions from hedge funds in the U.K. and its offshore islands representing 1.1% of assets and hedge funds in Asia excluding China and Japan shedding $4.9 billion in redemptions.

Elsewhere in the world, hedge funds in the U.S. and its offshore islands took in nearly $3.8 billion in April, 0.2% of assets, while funds in China and Hong Kong added more than $1.0 billion, 1.7% of assets,

“In the U.S., investors were heartened by a rebounding equity market, but in the U.K. and Europe the tune’s become all too familiar; Brexit and slowing growth in the Eurozone,” said Sol Waksman, president of BarclayHedge.

For the 12 months ending April 30, the hedge fund industry saw total redemptions of $147.8 billion, 4.9% of industry assets.

Macro funds set the pace for inflows over the 12 months ending April 30 taking in $15.1 billion, 7.3% of assets. Event Driven funds added 4.7% to assets over the 12 months taking in $6.8 billion, while Merger Arbitrage funds took in $2.2 billion, adding 3.3% to assets over the period.

Not surprisingly, the largest 12-month redemptions were driven by volatility in bond and equity markets. Fixed Income funds saw $30.1 billion in redemptions over the 12 months, 5.3% of assets, Balanced (Stocks & Bonds) funds experienced $26.7 billion in outflows, 10.8% of assets, Equity Long/Short funds saw 12.0% of assets — $26.4 billion – redeemed and Equity Long Bias funds reported $24.3 billion in redemptions, 7.7% of assets.

Emerging markets funds also found themselves caught up in global events. Notably, Emerging Markets – Global funds saw 12-month redemptions of $15.7 billion, 11.2% of assets.

“Trade-reliant emerging markets, particularly in Asia, have found themselves swept up in the effects of the U.S.-China trade battle, while tighter global financing conditions and a strengthening USD have added to the challenges faced by those countries,” Waksman said.

For managed futures funds the monthly redemption trend extended to a full year in April with the industry experiencing $400 million in outflows, 0.1% of assets. Over the 12 months ending April 30, managed futures funds saw $13.4 billion in net redemptions, 3.6% of assets. Total managed futures industry assets stood at $331.0 billion as April ended.