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Hedge funds return to net redemptions in November with $4.7bn in industry outflows

Friday, January 17, 2020
Opalesque Industry Update - After a one-month reprieve, the hedge fund industry returned to net outflows in November with $4.7 billion in redemptions, a reversal from October's $1.9 billion in industry inflows.

November's redemptions represented 0.2% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A $19.1 billion November trading profit brought total hedge fund industry assets to more than $3.16 trillion as the month ended, up from $3.13 trillion at the end of October.

November's redemptions were driven by numerous economic events and indicators that worried investors as summer came to a close, prompting sizable redemption volumes from funds in the U.K., the U.S. and China.

November data from the nearly 7,100 funds (excluding CTAs) in the BarclayHedge database showed investors pulling $6.2 billion from funds in the U.K. and its offshore islands, $4.4 billion from funds in the U.S. and its offshore islands and $1.0 billion from funds in China.

"The last weeks of summer posed a number of challenges for investors including the impact of heightened trade tensions between the U.S. and China on equity markets, reports of shrinking economies in the U.K. and Germany, ongoing Brexit uncertainty and recession fears prompted by an inverted yield curve," said Sol Waksman, president of BarclayHedge.

For the 12 months ending Nov. 30, the hedge fund industry experienced $122.9 billion in redemptions, 4.0% of assets. A $182.6 billion trading profit over the 12-month period contributed to the industry's $3.16 trillion in total assets as November ended, up from nearly $3.09 trillion a year earlier.

Most hedge funds sectors experienced redemptions for the 12-month period, though a few bucked the trend. Sectors posting 12-month inflows included Macro funds which added $22.4 billion, 6.9% of assets, Event Driven funds with $22.2 billion in inflows, 15.7% of assets, and Emerging Markets - Latin America funds which took in $1.6 billion, 14.9% of assets.

Relative underperformance against their benchmarks by hedge funds in equity and fixed income sectors continued to be reflected in the funds posting the largest 12-month redemptions. Equity Long/Short funds led the way with $40.7 billion in redemptions, 18.5% of assets, followed by Equity Long Bias funds which shed $37.5 billion over the period, 11.4% of assets, and Fixed Income funds which experienced $19.5 billion in 12-month redemptions, 3.5% of assets.

The managed futures industry also experienced net outflows in November with $905.8 million in redemptions. A $3.0 billion trading profit for the month brought total industry assets to $310.2 billion as November ended, up from $305.4 billion at the end of October.

"Back-to-back losses in September and October on the back of uninspiring year-to-date returns pushed some investors to redeem in November," said Waksman.

CTA redemptions were the norm in most regions in November, led by the U.K. and its offshore islands which saw $1.4 billion in redemptions, 2.4% of assets. CTAs in Asia excluding China and Japan shed $264.4 million during the month, 3.4% of assets, while funds in Continental Europe experienced $125.0 million in redemptions, 0.4% of assets.

Among the regions running counter to the redemption trend, CTAs in the U.S. and its offshore islands took in $399.9 million, 0.2% of assets, in November.

For the 12 months ending Nov. 30, CTA funds experienced $17.3 billion in outflows, 4.9% of industry assets. A $16.7 billion trading profit over the period contributed to the industry's $310.2 billion in total assets at the end of November, which was down from nearly $350.7 billion a year earlier.

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