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Hedge funds reverse two-month redemption trend with $21.2bn in inflows in January

Thursday, March 19, 2020
Opalesque Industry Update - The hedge fund industry experienced $21.2 billion in inflows in January, reversing a two-month redemption trend in a turnaround from December's $29.0 billion in redemptions.

January's inflows represented 0.7% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A January trading profit of $6.8 billion brought total hedge fund industry assets to more than $3.26 trillion as January came to a close, up from $3.19 trillion at the end of December.

January's industry inflows were fueled largely by hedge funds in the U.S. and its offshore islands, which took in $20.7 billion during the month from investors heartened by a November stock market rally. Data from 7,100 funds (excluding CTAs) in the BarclayHedge database showed hedge funds in Continental Europe, Canada and Latin America adding to the net inflow total.

"Heading into a new quarter and a new year, investors' confidence was buoyed by U.S. equity markets' best performance since June," said Sol Waksman, president of BarclayHedge. "An October Fed rate cut and positive data on retail sales and housing starts boosted spirits further. Meanwhile, in Europe, the economic news out of Germany was just good enough to ease investors' recession fears."

Over the 12-month period ending in January, the hedge fund industry experienced $64.3 billion in redemptions, 2.2% of industry assets. A $191.6 billion 12-month trading profit brought industry assets to $3.26 trillion as January ended, up from $2.96 trillion a year earlier.

Most hedge fund sectors experienced net redemptions over the 12-month period through January, though two bucked the trend. Event Driven funds brought in $32.7 billion, 23.4% of assets, over the period, followed by Balanced (Stocks & Bonds) funds which added $8.3 billion, 2.9% of assets.

Sectors with the largest 12-month redemptions included Equity Long/Short funds with $37.7 billion in outflows, 17.9% of assets, Equity Long Bias funds which shed $17.1 billion, 5.3% of assets, and Equity Market Neutral funds which saw outflows of $14.6 billion, 15.6% of assets.

The managed futures industry had a different experience in January, reversing December's net inflows with $1.5 billion in redemptions. A $1.0 billion January trading loss left industry assets at $315.7 billion as January ended, down from $318.4 billion a month earlier.

"Volatility aside, equity markets had a strong year in 2019, leading some investors to reduce exposure to managed futures," said Waksman.

CTA redemptions were the norm in most regions in January, led by funds in the U.S. and its offshore islands which experienced nearly $1.7 billion in redemptions, 0.8% of assets.

While managed futures redemptions were the norm in most regions of the world in January, the picture was brighter in the U.K. and its offshore islands where CTAs took in $248.6 million, 0.4% of assets, and in Japan where managed futures funds experienced $21.3 million in inflows, 5.2% of assets.

For the 12-months through January, CTA funds experienced $15.6 billion in outflows, 4.4% of assets. A $17.2 billion trading profit over the period contributed to bringing total industry assets to the $315.7 billion figure at the end of January, down from $350.8 billion a year earlier.

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