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An aggregate -$59.87 billion trading loss in February 2023 tamped down total industry assets to $4.99 trillion as the month ended.

"The party was over almost as quickly as it began. As analysts and traders integrated heaps of January macroeconomic data, both debt and equity markets soured, dumping buckets of rain on the parades that had only just started in January," remarked Ben Crawford, Head of Research at Backstop-BarclayHedge. "The combination of strong jobs data, historically-low new unemployment claims, and stubbornly high inflation figures all pointed in the same direction: Toward longer-term and potentially more aggressive monetary tightening."

All but a handful of hedge fund subsectors reported net outflows in February. The merry procession of winners was led by the Emerging Markets - Asia segment, which scooped up an additional $3.53 billion (2.09% of sector assets). It was followed by Fixed Income funds, which snagged new assets worth $2.56 billion (0.28% of sector assets); Equity Markets Neutral funds up $495.39 million (0.98% of sector assets); and Emerging Markets - Eastern Europe funds which added $46.27 million (2.45% of sector assets).

Among the subsectors recording the largest net redemptions in February were Sector Specific funds with -$3.02 billion (-0.61% of sector assets); Multi-Strategy funds with -$2.14 billion (-0.31% of sector assets); Merger Arbitrage funds shedding -$2.10 billion (-1.63% of sector assets); Balanced (Stocks & Bonds) funds with -$2.09 billion (-0.27% of sector assets); and Equity Long/Short funds with net outflows totaling -$1.99 billion (-1.27% of sector assets).

The managed futures industry was similarly unable to build on the asset gains booked in January. Indeed, February saw the trend snap back rather violently to net redemptions. On the month, Managed Futures hemorrhaged -$6.10 billion in net outflows (-1.69% of assets). In monetary terms, this amounted to the worst month for the industry since pandemic lockdowns began in March of 2020 and the second worst percentage outflow in the past five years.

The entirety of the net outflows (-$7.19 billion in all) came from the largest subsector of the industry, Systematic CTAs, while the other three subsectors enjoyed positive net inflows on the month. The gains of the remainder of the industry, however, were only sufficient to cushion a small fraction of the carnage in the systematic sector.

12-Month Flow Trends

Over the 12-month period through February the hedge fund industry experienced -$338.29 billion in outflows. A $199.89 billion trading loss over the period brought total industry assets to the $4.99 trillion figure as February ended, down from $5.05 trillion at the end of January and down from $5.14 trillion a year earlier.

The number of hedge fund subsectors posting 12-month inflows grew smaller in February. Merger Arbitrage funds remained up $965.19 million in inflows (+0.96% of assets) over the trailing 12-month interval, while Convertible Arbitrage funds stayed net positive with $446.45 million (+1.18% of assets).

Nowhere have the redemptions been more eye-popping than from the Fixed Income subsector of the hedge fund industry. Over the trailing twelve months, its funds have watched -$112.57 billion (-11.24% of sector assets) walk out the door. Balanced (Stocks & Bonds) funds have been similarly, though less bombastically, impacted. That segment is underwater -$42.17 billion (-5.73% of sector assets). In that same neighborhood one also finds Equity Long Bias funds lighter by -$34.70 billion (-9.44% of sector assets); Equity Long/Short funds are down -$26.44 billion (-15.50% of sector assets); and Macro funds are off -$21.28 billion (-10.60% of sector assets).

For the 12 months through February, the managed futures industry experienced -$20.28 billion in redemptions (-5.78% of assets). An aggregate trading profit of $23.04 billion over that period contributed to placing total industry assets at $361.19 billion, up from $359.97 billion a year earlier.

Over the trailing twelve months, Discretionary CTAs saw $6.45 billion in inflows, good for a +36.29% increase in the subsector's assets, while Multi Advisor Futures Funds attracted $2.32 billion (+16.78% of assets) and Hybrid CTAs added $75.15 million (+0.38% of assets).

Systematic CTAs set the managed futures industry's 12-month redemption direction, however, with -$26.81 billion in outflows (-8.38% of assets).

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