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Redemption Trend Slows as Hedge Funds Profitable Again in November

Investor Capital Flees Systematic CTAs for the Six Month in a Row

FAIRFIELD, IOWA January 31, 2023

Hedge fund net redemptions slowed somewhat in November to -$20.05 billion, -0.42% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions. 

A $135.17 billion November trading profit brought total hedge fund industry assets to nearly $4.90 trillion as the month ended. 

“The hedge fund industry’s assets have been in a downtrend for almost the entirety of 2022. November carried the pattern forward, though at a markedly reduced pace,” reflected Ben Crawford, Head of Research at BarclayHedge.  “From March onward, we’ve seen investors redeem (on average) nearly $45 billion more per month than they’ve invested with hedge funds. This in turn has had a chilling effect on the plans of both upstart and established managers seeking to launch new funds. Year-over-year, new fund launches are down more than 63% in 2022.” 

While a majority of tracked hedge fund subsectors did suffer net redemptions in November, there were several that picked up new capital. Sector Specific funds attracted $1.19 billion during the month (+0.26% of assets). Equity Long Only funds garnered approximately $860 million in inflows (+0.22% of assets); Event Driven funds brought in approximately $700 million (+0.28% of assets); and Convertible Arbitrage funds added $310 million (+0.82% of assets). 

Subsectors experiencing the largest net redemptions in November included Fixed Income funds with $7.77 billion in outflows (-0.89% of assets), Emerging Markets – Asia funds with $3.33 billion exiting (-2.44% of assets); Multi-Strategy funds with $3.02 billion in redemptions (-0.44% of assets); Balanced (Stocks & Bonds) funds with -$2.63 billion in outflows (-0.36% of assets); and Equity Long Bias funds which shed $2.57 billion (-0.84% of assets). 

The managed futures industry experienced -$1.89 billion in November redemptions (-0.48% of industry assets). As has been the case for the duration of this trend, three of four CTA subsectors tracked enjoyed net inflows for the month, but the volume of outflows from Systematic CTAs (-$2.33 billion) swamped the gains of the rest the industry.   

Three of four CTA subsectors enjoyed net inflows for the month. Hybrid CTAs attracted $250 million (+1.06% of assets); while Discretionary CTAs picked up $190 million in inflows (+0.63% of assets); and Multi Advisor Futures Funds brought in $10 million (+0.03% of assets). 

A -$17.12 billion trading loss during the month brought total CTA industry assets to $379.05 billion at the end of November, down from $398.01 billion at the end of October. 

12-Month Flow Trends 

For the 12 months through November 2022, the hedge fund industry accumulated -$297.17 billion in net redemptions. A -$358.46 billion trading loss over the period brought total industry assets to the $4.90 trillion figure as November ended, up from $4.74 trillion at the end of October, and up from $4.69 trillion a year earlier. 

Merger Arbitrage funds led, bringing in a combined $9.67 billion more than investors redeemed, resulting in a net increase of 10.35% in the subsector’s assets. Convertible Arbitrage funds attracted $4.98 billion, swelling their coffers by a combined 14.62% while Emerging Markets – Latin America funds had $640 million in net inflows, or 6.24% of assets. 

Subsectors with the largest 12-month outflows included Fixed Income funds with -$120.67 billion in net redemptions, for a reduction of -11.99% of assets; Balanced (Stocks & Bonds) funds with -$35.29 billion exiting (-4.84% of assets); Equity Long Bias funds shedding -$29.47 billion (-8.03% of assets); Emerging Markets – Asia funds with -$22.04 billion in outflows (-11.18% of assets); and Emerging Markets – Global funds with -$21.24 billion in redemptions (-9.44% of assets). 

For the 12-months through November, the managed futures industry was subject to -$10.87 billion in net outflows (-3.14% of industry assets). A $33.92 billion trading profit over the period contributed to the $379.05 billion in industry assets, up from $346.57 billion a year earlier. 

Three of four CTA subsectors experienced net 12-month inflows. Discretionary CTAs added $6.64 billion (+35.98% of assets); Multi Advisor Futures Funds attracted $3.04 billion (+22.75% of assets); and Hybrid CTAs saw $680 million in inflows (+3.49% of assets). 

Systematic CTAs’ redemption trend tipped the balance over the 12-month period as well, as the subsector dropped -$18.26 billion in outflows (-5.80% of assets). 


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Malea Lydon 

BackBay Communications