FAIRFIELD, IOWA MARCH 2, 2023
Hedge fund industry redemptions picked up in December to -$45.82 billion, equivalent to a -0.94% reduction of industry assets, according to the Barclay Fund Flow Indicator published by Backstop-BarclayHedge.
A -$69.78 billion trading loss in December brought total hedge fund industry assets down to $4.84 trillion as the month ended.
“2022 closed in much the same manner as it proceeded: Investors consistently, though measuredly, cut exposure to hedge funds and Systematic CTAs throughout the year, with the quarter-ending months seeing the greatest proportion of selling activity,” reflected Ben Crawford, Head of Research at Backstop-BarclayHedge. “The steady redemption pressure on existing funds had the effect of tamping down the number of new fund launches. The count of new fund launches in 2022 appears to be down more than 60% year-over-year.”
While a sizable majority of hedge fund subsectors saw redemptions in December, , a few reported inflows. They were led by Equity Long-Only funds which were up +$2.97 billion (0.72% of sector assets), followed closely Emerging Markets - Asia funds which swelled +$2.61 billion (1.79% of sector assets). Elsewhere, a triad of sectors came out just ahead in December: Distressed Securities funds climbed +$3.34 million (0.22% of sector assets); the Emerging Markets - Global funds sector picked up +$20.15 million (0.09% of sector assets); and the Emerging Markets - Eastern Europe sector eked out +$0.5 million in net subscriptions in December.
Subsectors reporting redemptions in December were led by Multi-Strategy funds which saw -$23.64 billion worth of net redemptions (-3.37% of sector assets). They were followed by Fixed Income funds which were hit up for -$9.79 billion (-1.09% of sector assets). Macro funds were drained -$4.34 billion (-2.29% of sector assets); Equity Long Bias funds lost -$4.24 billion (-1.34% of sector assets); Balanced (Stocks & Bonds) funds leaked -$2.46 billion (-0.32% of sector assets); and Event Driven funds were down -$2.05 billion (-0.81% of sector assets).
The managed futures industry’s monthly redemption streak stretched to seven with -$4.39 billion in net outflows, for a reduction of -1.16% of industry assets. All four CTA subsectors tracked reported net redemptions for the month, led by Systematic CTAs with -$3.97 billion in outflows. Multi Advisor Futures Funds suffered approximately -$410 million in redemptions (-1.93% of sector assets); Hybrid CTAs saw approximately -$250 million exit (-1.11% of sector assets); and Discretionary CTAs experienced approximately -$170 million in outflows (-0.58% of assets).
12-Month Flow Trends
The hedge fund industry experienced -$322.56 billion more in redemptions than subscriptions. A -$467.99 billion aggregate trading loss for the year brought total industry assets to the $4.84 trillion figure as December ended, down from $4.90 trillion at the end of November but up slightly from nearly $4.80 trillion a year earlier.
Convertible- and Merger- Arbitrage funds led a small (but merry!) band of hedge fund subsectors in posting net subscriptions for calendar year 2022. Merger Arbitrage funds had the largest absolute increase, picking up +$7.61 billion (8.07% of sector assets) while Convertible Arbitrage funds grew their capital base the most in relative terms with +$3.76 billion in net subscriptions (10.69% of sector assets). Elsewhere, Emerging Markets - Latin America funds tagged along with +$12.24 million (1.16% of sector assets).
Among Hedge Fund subsectors which lost assets over the trailing 12 months, Fixed Income funds were by far the hardest hit with -$128.75 billion in net redemptions (-12.67% of sector assets). In relative terms, Fixed Income funds were among the bottom three performing subsectors, flanked by Equity Market Neutral funds, which surrendered -$7.17 billion (-13.02% of sector assets), and Equity Long/Short funds which gave up -$21.48 billion (-12.55% of sector assets).
For the 12 months through December, the managed futures industry experienced -$13.55 billion in aggregate net redemptions, equivalent to a loss of -3.91% of industry assets. A $30.10 billion trading profit in 2022 contributed to $364.95 billion in total industry assets as the year closed, up from $348.44 billion a year earlier.
“While investor rotation away from Systematic CTAs was a big trend throughout 2022, we would be remiss if we didn’t call out that both Discretionary CTAs and Multi-Advisor Futures Funds enjoyed a banner year for asset growth,” commented Crawford.
Three of four CTA subsectors posted inflows for the calendar year 2022. Discretionary CTAs had net subscriptions of +$6.36 billion (35.61% of sector assets); Multi-Advisor Futures Funds picked up +$2.58 billion (19.93% of sector assets); and Hybrid CTAs gained +$6.19 million (0.32% of sector assets).
Redemptions from Systematic CTAs in 2022 outpaced subscriptions by -$20.04 billion (-6.35% of sector assets).
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