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Despite Global Downturn, Hedge Fund Industry AUM a Mere 3.4% Off All Time High

Profit-Taking from Systematic Funds Eclipses AUM Gains in All Other CTA Sectors


The pace of Hedge Fund redemptions accelerated slightly in August to -$18.92 billion (-0.38% of industry assets), according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A -$54.13 billion trading loss during the month brought total hedge fund industry assets to more than $4.96 trillion as August ended.

“Since February 2022, we’ve seen an unbroken trend of net outflows from hedge funds that has sapped more than -$166 billion worth of AUM from managers. While this unchecked wave of redemptions represents a clear reversal of the pattern we observed throughout 2021, it is in no way reflective of a widespread condemnation of hedge funds,” reflected Ben Crawford, Head of Research at BarclayHedge. “In point of fact, with the inclusion of new fund starts, we project that total industry AUM in August is only 3.4% off its all-time peak, realized in March 2022. Given the general pall that has fallen over most markets in 2022, capital flight from hedge funds might have been far more pronounced than it has been.”

Save a handful of exceptions, net redemptions from hedge funds were the norm in August. Among those attracting net new investments were Merger Arbitrage funds, bringing in $0.98 billion, Multi-Strategy funds, with $0.37 billion in inflows, and Emerging Markets – Latin America funds, adding approximately $130 million. Convertible Arbitrage funds picked up around $90 million in August and Distressed Securities funds were effectively flat.

Among the much larger group of subsectors experiencing net outflows in August, almost half suffered net redemptions worth -$1 billion USD or more. Fixed Income funds were hardest hit, shedding -$3.63 billion. Fixed Income was followed by a slouching procession of Equity strategies: Equity Long Bias funds saw -$2.24 billion in outflows; Equity Long/Short funds were down -$2.16 billion; and Equity Long-Only funds lost -$2.12 billion. Elsewhere, Emerging Markets- Global funds suffered a -$1.93 billion flight of assets and Equity Market Neutral funds found themselves -$1.85 billion lighter. Managers who work a blend of equity and fixed income strategies were pincered between groups of investors trimming exposure to both, leading Balanced (Stocks & Bonds) funds to find their coffers -$1.76 billion thinner. Option Strategies and Sector Specific managers watched as -$1.58 billion and -$1.20 billion worth of investor capital departed, respectively.

The managed futures industry posted a third consecutive month of net redemptions with -$4.44 billion in August outflows. Flight from Systematic CTAs, which had net redemptions numbering -$4.60 billion was the overwhelming force behind the industry’s loss of investor capital in August. Hybrid CTAs also lost capital but at about half the velocity seen among their fully-systematic counterparts. The Hybrid segment surrendered around -$170 million in investor capital in August.

Discretionary and Multi-Advisor Funds both picked up assets in excess of 1% of their global AUMs. Discretionary CTAs had net subscriptions of approximately $0.32 billion and Multi-Advisor Futures Funds were up $0.25 billion, but this healthy pickup of new assets was insufficient to counterbalance redemptions from the much larger Systematic subsector.


12-Month Flow Trends

For the trailing 12 months through August 2022, the hedge fund industry’s net redemptions totaled -$119.64 billion which amounted to a reduction in industry AUM of -2.65%. A combined -$423.08 billion trading loss over the 12-month period brought total industry assets under management to the $4.96 trillion figure as August ended, down from $4.99 trillion at the end of July but still up from $4.53 trillion a year earlier.

Multi-Strategy funds have dominated all other hedge fund subsectors (in dollar terms) having picked up more than $34.41 billion in new assets. This impressive number, however, amounts to an overall increase in AUM of 7.34% which is somewhat more modest in comparison to the growth enjoyed by other subsectors. In proportional terms the clear winner has been Convertible Arbitrage funds, which have seen their AUM numbers swell by more than 21% since the beginning of September 2021 as they’ve packed on $6.62 billion more in subscriptions than redemptions. Merger Arbitrage funds have also seen impressive growth over the trailing twelve-month interval, adding $13.05 billion in net subscriptions good for an increase in assets of +14.86%.

As for the hedge fund subsectors that have been the most reviled by investors over the past twelve months, (in dollar-terms) no one is in Fixed Income’s league. Fixed Income managers are down -$72.44 billion (-7.34% of net assets) since September 2021. This single subsector accounts for more than $6 of every $10 dollars in net redemptions suffered by the hedge fund industry over this period.

Proportionally speaking, the Fixed Income subsector’s woes are eclipsed by only two others, both of the Emerging Market variety: Emerging Markets - Latin America and Emerging Markets – Global have been over-redeemed to the tune of -13.79% and -10.23%, respectively.

Over the trailing twelve-months ending in August, the managed futures industry has suffered a combined -$5.22 billion in net redemptions, leaving its coffers -1.54% lighter. A $47.32 billion trading profit over the period contributed to the $395.1 billion in total industry assets, up from $342.99 billion a year earlier.

Systematic CTAs, by far the largest subsector in the industry, has been subject to -$11.35 billion in net outflows since September 2021. This represents a loss of assets of approximately -3.64% for the subsector and a relatively marginal shrinkage. In comparison, consider that, over the trailing twelve-months, Discretionary CTAs have ballooned their AUM by more than 30% (+$5.13 billion); Multi Advisor Futures Funds have grown their assets by more than 21% (+$2.71 billion); and Hybrid CTAs have attracted 5% more investor capital (+$930 million). Nevertheless, the -$11 billion in net redemptions taken from Systematic CTAs swamps the almost $9 billion in net subscriptions garnered by the rest of the industry.


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Malea Lydon

BackBay Communications