Redemptions from hedge funds hit a 20-month high in June, according to the Barclay Fund Flow Indicator, as the financial markets weighed the risks of trade disputes and rising interest rates. Hedge fund industry assets remained at an all-time high of USD3.0 trillion.
Data drawn from more than 5,000 hedge funds in the BarclayHedge database estimated that the hedge fund industry (excluding CTAs) gave up USD8.9 billion (-0.3 per cent of assets) in June, reversing inflows of USD4.0 billion (0.1 per cent of assets) the month before. June marked the largest outflow since October 2016, according to the Barclay Fund Flow Indicator, a monthly big-picture report on the health of the alternative investments industry.
“Investors faced multiple uncertainties in June,” said Sol Waksman, founder and president of BarclayHedge. “We had a strong US unemployment report, but we also had more headlines about trade disputes and the prospect of higher interest rates in the months ahead. Economic ambiguities and hedge fund outflows often go hand in hand.”
Waksman noted that despite June’s setback, industry assets climbed 3.7 per cent year-to-date and surged 16.2 per cent over the trailing 12 months.
Fixed Income hedge funds saw the heaviest total inflows in the trailing 12 months ending in June, adding USD24.2 billion (5.0 per cent of assets). Equity Market Neutral funds had the strongest 12-month inflows as a percentage of assets (USD15.3 billion, 20.7 per cent of assets).
At the regional level, hedge funds focused on the US and its offshore islands fared the worst in June, giving up USD9.1 billion (-0.6 per cent of assets) and reversing an inflow of USD7.4 billion (0.5 per cent of assets) the month before. “Turmoil over tariffs and other issues seems to have spooked these investors,” Waksman says.
Demand for hedge funds focusing on the U.K. and its offshore islands turned negative in June. “UK-centred funds have seen a troubling turnabout,” Waksman said. “Demand for U.K. funds flattened in the past two months, stalling the trend of the past 12 months, when they hauled in USD70.5 billion (14.4 per cent of assets).”
In the managed futures sector, commodity trading advisor (CTA) funds added assets in June, halting a four-month slide. Rising commodity prices worldwide have helped push CTA assets up 7.2 per cent over the past 12 months.
“The return to asset growth in June looks like a vote of confidence in the CTA sector, which seemed unnerved by the persistent ascent of oil prices in the first half of 2018,” Waksman says.
