Hedge fund redemptions reached USD42.3 billion in December, according to the Barclay Fund Flow Indicator, published by BarclayHedge, the largest monthly outflow in at least five years.
Data from the nearly 6,000 funds included in the BarclayHedge database showed the December activity of hedge fund investors worldwide (excluding CTAs) producing a fourth straight month of net redemptions, exceeding September’s USD39.1 billion, at the time a five-year high.
“December redemptions were driven by both global and regional factors,” says Sol Waksman, president of BarclayHedge. “Globally investors worried about volatile equity markets, the threat of a worldwide economic downturn, drops in prices for major commodities like oil and trade disputes. Within specific regions, concerns like ongoing uncertainty over a Brexit agreement, and a weakening German economy, continued to pressure funds in the UK and Europe, while a government shutdown added to the pressure on US funds in December.”
China/Hong Kong and Latin America were the only regions to see hedge funds post net inflows in December. China/Hong Kong hedge funds posted nearly USD154.4 million in inflows in December, adding 3.3 per cent to assets. Latin American hedge funds attracted nearly USD135.0 million – 1.3 per cent of assets – in December. Meanwhile, investors drew nearly USD24.3 billion from US and their offshore Islands hedge funds in December, reducing total assets by 1.6 per cent.
Hedge funds in the UK and their offshore Islands and Continental Europe continued to struggle with Brexit uncertainty. UK and UK based offshore Islands hedge funds saw outflows of 1.5 per cent of assets – nearly USD8.6 billion in December, while hedge funds in Continental Europe experienced nearly USD6.8 billion in December redemptions, trimming 0.9 per cent from assets.
For the year, hedge fund outflows stood at USD89.2 billion, 3.1 per cent of total industry assets. As 2018 closed, total hedge fund industry assets stood at nearly USD2.88 trillion.
Sector Specific funds set the pace for inflows in 2018, adding USD6.9 billion, 4.7 per cent of assets, over the 12-month period. Event Driven funds also showed strength in 2018, adding 4.2 per cent to net assets with USD6.2 billion in inflows. Balanced (Stocks & Bonds) funds led the field in redemptions in 2018 with USD30.0 in outflows, drawing assets down 13.5 per cent. “Balanced Fund redemptions are a reflection of the struggles stock and bond markets faced in 2018,” Waksman says.
In the managed futures area, December was the eighth month in 2018 marked by net outflows for CTA funds, though the month’s redemptions stood at a relatively modest USD90 million, a slim portion of the industry’s USD355.1 billion in total assets as the year ended. For the year, CTA funds added USD6.6 billion in assets, increasing asset value by 1.9 per cent.
