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Hedge fund investors redeem $1.0 Billion in July, even as AUM hits new highs

Tuesday, September 18, 2018
Opalesque Industry Update - Outflows from the hedge fund industry slowed substantially in July amid mixed signals on trade and the global economy, according to the Barclay Fund Flow Indicator. Hedge fund industry assets rose to an all-time high of $3.1 trillion in July.

Data drawn from more than 5,000 hedge funds in the BarclayHedge database estimated that the hedge fund industry (excluding CTAs) gave up $1.0 billion (-0.03% of assets) in July, slowing nearly nine-fold from redemptions of $8.9 billion (-0.3% of assets) the month before. The back-to-back outflows underscore uncertainties about trade, corporate earnings and global commodities prices, according to the Barclay Fund Flow Indicator, a monthly big-picture report on the health of the alternative investments industry.

"Corporate earnings and global equities indexes showed impressive strength in July," said Sol Waksman, founder and president of BarclayHedge. "At the same time, hedge fund investors had to weigh July's good news against the global implications of trade disputes, a rising dollar and declining commodity prices."

Waksman noted that despite two months of redemptions, hedge fund industry assets climbed 5.3% year-to-date and 15.3% over the trailing 12 months.

At the sector level, fixed Income hedge funds saw the heaviest inflows in the trailing 12 months ending in July, adding $24.4 billion (5.0% of assets). Equity Market Neutral funds had the strongest 12-month inflows as a percentage of assets ($16.4 billion, 21.3% of assets).

At the regional level, hedge funds domiciled in the U.K. and its offshore islands fared the best in July, reeling in $4.6 billion (0.7% of assets). "U.K.-based funds have been immensely popular in recent months," said Waksman. These funds added $29.3 billion (5.0% of assets) year-to-date and $65.7 billion (12.8% of assets) in the trailing 12 months. "Their U.S.-based counterparts, by contrast, had the largest July redemptions at $2.4 billion (-0.2% of assets)," he said.

In the managed futures sector, dollar strength and declining oil and metals prices sapped demand for Commodity Trading Adviser (CTA) funds, which redeemed $2.4 billion (-0.6% of assets) in July, the largest outflows since December 2016.

"Demand for CTAs has been tepid since a powerful rally in the U.S. dollar started in March," Waksman said. CTA assets dipped 3.2% to $357.5 billion in July, a year-to-date low.

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