FAIRFIELD, Iowa, February 14, 2019 – Hedge fund redemptions picked up significantly in December, as nervous investors fretted about stock market volatility, global economic uncertainty, major commodity price downturns and other economic factors.
Hedge fund redemptions reached $42.3 billion in December, according to the Barclay Fund Flow Indicator, published by BarclayHedge, a division of Backstop Solutions. December’s redemptions represented the largest monthly outflow in at least five years.
Data from the nearly 6,000 funds included in the BarclayHedge database showed the December activity of hedge fund investors worldwide (excluding CTAs) producing a fourth straight month of net redemptions, exceeding September’s $39.1 billion, at the time a five-year high.
“December redemptions were driven by both global and regional factors,” said Sol Waksman, president of BarclayHedge. “Globally investors worried about volatile equity markets, the threat of a worldwide economic downturn, drops in prices for major commodities like oil and trade disputes. Within specific regions, concerns like ongoing uncertainty over a Brexit agreement, and a weakening German economy, continued to pressure funds in the U.K. and Europe, while a government shutdown added to the pressure on U.S. funds in December.”
China/Hong Kong and Latin America were the only regions to see hedge funds post net inflows in December. China/Hong Kong hedge funds posted nearly $154.4 million in inflows in December, adding 3.3% to assets. Latin American hedge funds attracted nearly $135.0 million – 1.3% of assets – in December. Meanwhile, investors drew nearly $24.3 billion from U.S. and their offshore Islands hedge funds in December, reducing total assets by 1.6%.
Hedge funds in the U.K. and their offshore Islands and Continental Europe continued to struggle with Brexit uncertainty. U.K. and U.K. based offshore Islands hedge funds saw outflows of 1.5% of assets – nearly $8.6 billion in December, while hedge funds in Continental Europe experienced nearly $6.8 billion in December redemptions, trimming 0.9% from assets.
For the year, hedge fund outflows stood at $89.2 billion, 3.1% of total industry assets. As 2018 closed, total hedge fund industry assets stood at nearly $2.88 trillion.
Sector Specific funds set the pace for inflows in 2018, adding $6.9 billion, 4.7% of assets, over the 12-month period. Event Driven funds also showed strength in 2018, adding 4.2% to net assets with $6.2 billion in inflows. Balanced (Stocks & Bonds) funds led the field in redemptions in 2018 with $30.0 in outflows, drawing assets down 13.5%. “Balanced Fund redemptions are a reflection of the struggles stock and bond markets faced in 2018,” Waksman said.
In the managed futures area, December was the eighth month in 2018 marked by net outflows for CTA funds, though the month’s redemptions stood at a relatively modest $90 million, a slim portion of the industry’s $355.1 billion in total assets as the year ended. For the year, CTA funds added $6.6 billion in assets, increasing asset value by 1.9%.
The monthly Barclay Fund Flow Indicator, published by BarclayHedge, can be found here.
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Backstop’s mission is to help the institutional investment industry use time to its fullest potential. We develop technology to simplify and streamline otherwise time-consuming tasks and processes, enabling our clients to quickly and easily access, share, and manage the knowledge that’s critical to their day-to-day business success. Backstop provides its industry-leading cloud-based productivity suite to investment consultants, pensions, funds of funds, family offices, endowments, foundations, private equity, hedge funds, and real estate investment firms.
BarclayHedge, a division of Backstop, currently maintains data on more than 6,900 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 division of Backstop Solutions Group