The hedge fund industry’s redemption trend continued in September as a fourth straight month of net outflows saw monthly redemptions increasing to $14.7 billion.
September’s redemptions represented 0.5% of hedge fund industry assets and were up from August’s $11.3 billion in net outflows, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.
Coupled with a $9.1 billion trading profit in September, hedge fund industry assets stood at more than $3.05 trillion at the end of the month.
September’s redemptions reflected investors’ response to a summer of equity and bond market volatility and a variety of troublesome economic indicators emerging from the U.S., the U.K., Europe and China. Every region of the world experienced net hedge fund outflows for the month.
Data from the nearly 6,000 funds (excluding CTAs) included in the BarclayHedge database showed investors pulling more than $7.3 billion from funds in the U.K. and its offshore islands in September while U.S. hedge funds experienced more than $1.3 billion in redemptions. Meanwhile, hedge funds in Continental Europe shed more than $937.2 million during the month, while outflows from funds in China and Hong Kong totaled $636.3 million.
“The story of the summer seemed to be that every positive bit of economic news was offset by a worrisome report or event,” said Sol Waksman, president of BarclayHedge. “Equity markets were buoyed by anticipation of a Fed rate cut one day, then rattled by fears of heightened U.S.-China trade tensions the next. Brexit uncertainty may have become a familiar refrain, but familiarity makes it no less a concern for U.K. hedge fund investors. Meanwhile manufacturing downturns in the U.S., China, the U.K. and the Eurozone prompted concerns about a slowing global economy.”
For the 12-month period through September 30, the hedge fund industry experienced $169.7 billion in redemptions, 5.5% of industry assets. A $72.7 billion trading profit over the period brought total industry assets to more than $3.05 trillion as September closed, down from $3.08 trillion at the end of August.
Outflows were the norm for the lion’s share of hedge fund sectors for the 12 months ending September 30, though a handful experienced inflows over the period. Sectors posting inflows were led by Macro funds, which brought in $16.5 billion over the 12 months, 8.1% of assets, and Event Driven funds, with $15.3 billion in inflows, 10.2% of assets.
Hedge fund Sectors with the largest 12-month outflows continued to be those with sizable exposure to equity and bond market volatility. Equity Long/Short funds experienced $38.8 billion in redemptions over the 12 months, 17.2% of assets, Equity Long Bias funds saw $32.0 billion in outflows, 9.3% of assets, and Balanced (Stocks & Bonds) funds saw investors pull $24.7 billion from the sector, 9.8% of assets.
Managed futures reversed a 14-month redemption trend in September with $2.6 billion in inflows, 0.9% of industry assets. A $500 million trading loss left industry assets at $308.4 billion as September closed, up from $304.3 billion a month earlier.
“In a climate of mixed economic signals, CTAs’ role as a portfolio diversification tool came to the fore in September,” said Waksman.
The CTA industry was split by region between net inflows and net redemptions. CTAs in the U.S. and its offshore islands took in nearly $2.0 billion in September, 1.0% of assets, while funds in the U.K. and its offshore islands added nearly $804.0 million, 1.4% of assets. On the redemption side of the ledger, CTAs in Continental Europe experienced $158.6 million in redemptions, 0.4% of assets, while investors pulled $116.9 million, 1.5% of assets, from funds in Asia excluding China and Japan.
For the 12 months ending September 30, CTA funds experienced $22.5 billion in redemptions, 6.3% of industry assets. A $13.2 billion trading profit over the 12 months contributed to the industry’s $308.4 billion in total assets at the end of the month.
The monthly Barclay Fund Flow Indicator, published by BarclayHedge, can be found here.
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BarclayHedge, a division of Backstop, currently maintains data on more than 7,100 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.
BarclayHedge, a division of Backstop Solutions Group