The hedge fund industry felt the impact of the spreading COVID-19 pandemic in March as hedge fund redemptions jumped dramatically to $85.6 billion, a steep increase from February’s $8.1 billion in industry outflows.
March’s redemptions represented 2.7% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.
A March trading loss of trading loss of $229.1 billion brought total hedge fund industry assets to $2.86 trillion as April ended, down from $3.21 trillion at the end of February.
Data from 7,100 funds (excluding CTAs) in the BarclayHedge database showed Continental Europe as the hardest hit region in March’s redemption total with nearly $38.3 billion in outflows. U.S. hedge funds shed nearly $31.6 billion in assets, while funds in the U.K. experienced nearly $24.7 billion in redemptions.
“As the magnitude of the COVID-19 crisis became increasingly clear through January and February, equity market volatility increased, oil prices plunged and the economic fallout mounted,” said Sol Waksman, president of BarclayHedge. “Ultimately that volatility left investors with shrinking risk appetites and many decided it was time to hold cash. The result was hedge fund redemptions hitting their highest levels since the 2008-09 financial crisis.”
Over the 12-month period through March the hedge fund industry experienced $159.2 billion in redemptions. A $142.8 billion trading loss over the period brought industry assets to nearly $2.86 trillion at the end of March, down from $3.01 trillion a year earlier.
A handful of hedge fund sectors finished the month with 12-month inflows. Among them, Event Driven funds set the pace with $27.8 billion in inflows, 19.7% of assets, while Sector Specific funds brought in $7.6 billion, 4.4% of assets. And Convertible Arbitrage funds – the only sector to experience inflows in March – added $2.6 billion, 13.7% of assets over the 12 months.
On the 12-month redemptions side of the ledger, among those experiencing the largest outflows were Equity Long/Short funds with $40.2 billion in redemptions, 19.2% of assets, over the period, Fixed Income funds which shed $38.4 billion, 6.6% of assets, Equity Long Bias funds with $24.6 billion in redemptions, 7.4% of assets, and Macro Funds with $15.1 billion in outflows, 8.1% of assets.
The managed futures industry’s experience was similar to hedge funds in March with $19.0 billion in redemptions, up significantly from $1.7 billion in February outflows. A $9.3 billion monthly trading loss left industry assets at $278.0 billion as March ended, down from $307.9 billion at the end of February.
Managed futures funds in all regions of the world but one experienced redemptions in March. Funds in China and Hong Kong were the exception, bringing in $34.5 million, 8.1% of assets. The greatest redemptions were from CTAs in the U.S. and its offshore islands which shed $14.4 billion, 7.3% of assets. They were followed by managed futures funds in Continental Europe which experienced $3.3 billion in redemptions, 10.0% of assets, and the U.K. and its offshore islands with $2.2 billion in outflows, 3.5% of assets.
Over the 12-month period through March, CTAs experienced $32.4 billion in redemptions, 10.0% of assets. A $4.6 billion trading loss over the period contributed to the drop in total industry assets to the $278.0 billion level at the end of March from $322.9 billion a year earlier.
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. The BarclayHedge Indices are utilized by institutional investors, brokerage firms and private banks worldwide as performance benchmarks for the hedge fund and managed futures industries.
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