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Hedge fund redemptions continue in August

Tuesday, October 22, 2019
Opalesque Industry Update - The hedge fund redemption trend stretched to three straight months in August as the industry experienced $11.3 billion in outflows.

August's redemptions represented 0.4% of industry assets and were an increase from July's $8.1 billion in industry outflows, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

Coupled with monthly trading losses of $10.3 billion, hedge fund industry assets stood at more than $3.08 trillion as August ended, down from $3.12 trillion at the end of July.

The industry's August redemption total resulted largely from outflows from hedge funds in the U.K. and Europe where redemptions reflected investors' concerns over the ultimate shape of the U.K.'s exit from the European Union and troubling economic news from the Eurozone. Strong U.S. stock market performance early in the summer and positive economic news contributed to significant inflows to U.S. funds in August, but it wasn't enough to tip the industry wide balance.

Data from the nearly 6,000 funds (excluding CTAs) included in the BarclayHedge database showed hedge funds in the U.K. and its offshore islands experiencing $14.4 billion in redemptions in August, 2.7% of assets. Meanwhile, the month's outflows from funds in Continental Europe totaled $11.8 billion, 1.6% of assets.

The experience was different for U.S. hedge funds which brought in nearly $6.0 billion, 0.4% of assets, in August.

"Hedge funds in the U.K. and Europe continue to tip the industry balance to redemptions as investors fret over indicators suggesting a slowdown in European economies while a no deal Brexit remains a possible outcome of the U.K.'s Brexit conundrum," said Sol Waksman, president of BarclayHedge. "That said, U.S. funds had a positive experience in August with investors buoyed by early summer equity rallies and the Fed's July rate cut."

For the 12-month period through August, the hedge fund industry experienced $194.1 billion in redemptions, 6.3% of industry assets.

While most hedge fund sectors reported outflows for the 12-month period, a handful experienced net inflows for the period. Event Driven funds took in nearly $17.0 billion over the 12 months, 11.6% of assets, while Macro funds added $14.3 billion, 6.9% of assets, and Convertible Arbitrage funds took in more than $508 million, 2.6% of assets.

Equity and bond market volatility continued to be reflected in those sectors with the greatest 12-month redemption volume. Fixed Income funds experienced $52.9 billion in redemptions over the period, 8.9% of assets, Equity Long/Short funds saw $38.0 billion in outflows, 17.4% of assets, Equity Long Bias funds shed $28.3 billion, 8.2% of assets, and Balanced (Stocks & Bonds) funds saw $24.8 billion in redemptions over the 12 months, 10.1% of assets.

Managed futures funds saw their redemption trend extend to 14 straight months in August. For the month, CTAs experienced $5.0 billion in net redemptions, 1.5% of industry assets. Redemptions from funds in the U.S. and its offshore islands contributed the bulk of the month's redemptions as U.S. CTAs shed nearly $4.1 billion, 2.0% of assets.

For the 12 months through August, managed futures funds experienced $25.4 billion in redemptions, 7.1% of assets. A $900 million monthly trading loss left industry assets at $304.3 billion as August closed, down from $327.3 billion at the end of July.

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