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Hedge funds see $38.1bn in April redemptions

Tuesday, June 23, 2020
Opalesque Industry Update - The COVID-19 pandemic's considerable impact on hedge fund redemptions continued in April as the industry experienced $38.1 billion in outflows. While a sizable sum, the net redemption total was less than half of March's $85.6 billion redemption total.

April's redemptions represented 1.3% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A positive note was a $101.2 billion monthly trading profit fueled by an April stock market rally, bringing total hedge fund industry assets to more than $2.99 trillion as April ended, up from $2.86 trillion at the end of March.

Data from 6,000 funds (excluding CTAs) in the BarclayHedge database showed the greatest volume of April redemptions coming from hedge funds in the U.S. and its offshore islands where investors pulled out $21.7 billion during the month. Investors redeemed nearly $13.1 billion from funds in the U.K. and its offshore islands during the month, while funds in Continental Europe experienced nearly $2.6 billion in outflows.

"The total amount of hedge fund redemptions may have declined in April, but its significant volume showed that the COVID-19 pandemic's influence on investor sentiment remains a powerful force," said Sol Waksman, president of BarclayHedge. "Stock market volatility, troubling economic indicators on all sides and continued high unemployment led many investors to decide that the safest place for now is on the sidelines."

Over the 12-month period through April the hedge fund industry experienced $187.9 billion in redemptions. April's $101.2 billion trading profit reduced the industry's 12-month trading loss to $75.2 billion from $142.8 billion at the end of March, leaving total industry assets at $2.99 trillion at the end of April, up from $2.86 trillion at the end of March but down from nearly $3.10 trillion a year earlier.

Four hedge fund sectors posted 12-month inflows through April. Event driven funds added $23.0 billion 15.9% of assets, Sector Specific funds brought in $7.5 billion, 4.3% of assets, Convertible Arbitrage funds experienced $2.5 billion in inflows, 12.8% of assets, and Emerging Markets - Latin America funds added $1.6 billion, 13.8% of assets.

Among sectors booking 12-month redemptions, most notable were Fixed Income funds with $47.8 billion in redemptions, 7.6% of assets, Equity Long/Short funds with $42.0 billion in outflows, 20.1% of assets, and Equity Long Bias funds which shed $20.6 billion, 6.2% of assets.

The managed futures industry fared better than hedge funds in April, with the industry experiencing $1.5 billion in inflows, a considerable improvement on March's $19.0 billion in redemptions. A $2.1 billion trading profit in April helped bring industry assets to $280.8 billion as the month ended, up from $278.0 billion at the end of March.

CTAs in the U.K. and its offshore islands drove the industry inflow trend in April adding $2.7 billion during the month, 4.4% of assets. Funds in China and Hong Kong also experienced inflows taking in $25.0 million, 3.2% of assets. Regions experiencing net redemptions were led by CTA funds in the U.S. and its offshore islands which saw $833.4 million in outflows in April, 0.5% of assets.

Over the 12-month period through April, CTAs experienced $30.4 billion in redemptions, 9.2% of assets. An $8.3 billion trading loss over the period contributed to the industry's $280.8 billion in assets at the end of April, a drop from $330.9 billion a year earlier.

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