Hedge Fund Flows Turn Positive in February Ending Five-Month Redemption Trend According to Backstop BarclayHedge

Hedge fund flows turned positive in February, as a January stock market rebound, hopeful signs in U.S.-China trade talks and indications of a pause in U.S. interest rate hikes spurred investors to reverse a five-month trend of net redemptions.

The hedge fund industry posted $12.1 billion in net inflows in February, a significant improvement from January’s $24.1 billion in redemptions. February’s inflows represented 0.4% of hedge fund assets, according to the Barclay Fund Flow Indicator, published by BarclayHedge, a division of Backstop Solutions.

Data from the nearly 6,000 funds included in the BarclayHedge database showed hedge funds in most regions of the world (excluding CTAs) experiencing net inflows in February.

“A January stock market rebound buoyed investor sentiments,” said Sol Waksman, president of BarclayHedge. “The U.S. Fed’s signaling a rate hike pause was another positive, as were indications of a thaw in U.S.-China trade negotiations and positive economic signs in Latin America. In the aggregate, the positives outweighed concerns over the risk of a global economic slowdown, tightening financial conditions in some emerging markets and, of course, the continuing uncertainty over the U.K.’s Brexit.”

For the 12 months ending Feb. 28, the redemption trend still held firm, with net redemptions for the period totaling $123.2 billion, 4.2% of industry assets. Total hedge fund industry assets stood at nearly $2.96 trillion as February closed.

Macro funds continued to pace the hedge fund field for inflows for the 12-months ending Feb. 28, adding $13.2 billion, 6.4% of assets. Event Driven funds added nearly $5.6 billion – 3.9% of assets – over the 12 months, while Merger Arbitrage funds experienced more than $1.9 billion in inflows, 2.9% of assets.

While several other sectors experienced net inflows over the 12-month period, they were outnumbered by funds experiencing net redemptions over the 12 months.

“Bond market volatility driven by tighter monetary policies and a flattening yield curve put pressure on some sectors, as did 2018’s equity market volatility,” said Waksman.

Among those sectors were Fixed Income funds, which experienced nearly $28.8 billion in redemptions over the 12-months ending Feb. 28, a 5.2% decline in assets, and Balanced (Stocks and Bonds) funds, which saw $27.5 billion in redemptions over the 12-month period, an outflow of 12.5% of assets.

Across regions of the world, net inflows were the norm in February, with U.S. and Offshore Islands funds in particular benefitting from favorable market and government news. U.S. funds realized more than $13.9 billion in inflows for the month, adding 0.9% to assets. Hedge funds in Continental Europe, China/Hong Kong, Latin America and Asia Excluding China/Japan added to assets in February as well. Meanwhile, Brexit considerations appeared to be a continued weight on U.K. and Offshore Islands funds which experienced $3.6 billion in net redemptions in February, a drop of 0.6% of assets.

For managed futures funds, the redemption trend continued in February, with the month representing the tenth straight of net outflows for CTA funds. February’s $2.0 in redemptions represented 0.6% of CTA fund assets. Over the 12 months through the end of February, CTA funds experienced $12.7 billion in net redemptions, 3.4% of industry assets, with CTA funds finishing February with $351.1 billion in net assets.

The monthly Barclay Fund Flow Indicator, published by BarclayHedge, can be found here.

About Backstop Solutions

Backstop’s mission is to help the institutional investment industry use time to its fullest potential. We develop technology to simplify and streamline otherwise time-consuming tasks and processes, enabling our clients to quickly and easily access, share, and manage the knowledge that’s critical to their day-to-day business success. Backstop provides its industry-leading cloud-based productivity suite to investment consultants, pensions, funds of funds, family offices, endowments, foundations, private equity, hedge funds, and real estate investment firms.

BarclayHedge, a division of Backstop, currently maintains data on more than 6,900 hedge funds, funds of funds, and CTAs. Institutional investors, brokerage firms, and private banks worldwide utilize BarclayHedge indices as performance benchmarks for the hedge fund and managed futures industries.

MEDIA CONTACT:

Sol Waksman

BarclayHedge division of Backstop Solutions Group

(641) 472-3456

swaksman@barclayhedge.com