Sol Waksman, BarclayHedge

Hedge funds redemptions slow to USD1.8bn in July


Hedge fund redemptions slowed from the prior month’s pace in July, though outflows continued for a second straight month as the hedge fund industry experienced USD8.1 billion in net redemptions.

July’s redemptions, which represented 0.3 per cent of industry assets, were an improvement on June’s USD12.2 billion in outflows according to the Barclay Fund Flow Indicator published by BarclayHedge.
 
Monthly trading gains of USD17.5 billion brought total hedge fund industry assets to more than USD3.12 trillion as July ended, down from USD3.15 trillion in June.
 
While US hedge funds rode June’s equity market rally to net inflows in July, investors’ ongoing concerns over the potential for a messy break between the UK and the European Union dragged funds in the UK and Europe heavily into net redemption territory for the month.
 
Data from more than 6,000 funds (excluding CTAs) included in the BarclayHedge database showed July’s worldwide redemption trend was largely the result of activity in the UK and Europe. July saw hedge funds in the UK and its offshore islands experiencing nearly USD8.4 billion in redemptions, 1.4 per cent of assets, while those in Continental Europe shed nearly USD3.0 billion, 0.4 per cent of assets.
 
“With each month that goes by without a Brexit deal, investors grow increasingly skittish,” says Sol Waksman, president of BarclayHedge. “Those investor jitters were on full display in July’s UK and Europe redemptions. Manufacturing contraction in the Eurozone didn’t help and together those forces far offset the benefits c funds felt from a June equity rally and some positive economic news.”
 
For the 12 months ending 31 July, the hedge fund industry experienced USD161.3 billion in redemptions, 5.3 per cent of industry assets.
 
Redemptions remained the norm for most hedge fund sectors for the 12 months ending July 31, though a handful did post net inflows. Macro funds posted USD17.0 billion in inflows for the 12 months, 8.2 per cent of assets, while Event Driven funds took in USD14.8 billion, 10.2 per cent of assets. Emerging Markets-Asia funds took in USD646.7 million over the period, 0.6 per cent of assets, and Convertible Arbitrage funds added USD218.5 million, 1.1 per cent of assets.
 
Funds that were particularly exposed to the volatility in equity and bond markets over the past year continued to be those with the largest 12-month redemption totals through July. Equity Long/Short funds experienced USD36.5 billion in redemptions for the period, 16.9 per cent of assets, Equity Long Bias funds saw outflows of USD28.8 billion, 8.5 per cent of assets, Balanced (Stocks & Bonds) funds shed USD28.1 billion over the 12 months, 11.4 per cent of assets, and Fixed Income funds experienced USD27.1 billion in outflows, 4.6 per cent of assets.
 
Continuing a trend that’s gone beyond a year, managed futures funds faced another month of net redemptions in July. CTA funds experienced USD2.6 billion in outflows for the month, 0.8 per cent of industry assets. Again, concerns over the UK’s planned exit from the European Union were in evidence, with the month’s total managed futures redemptions largely resulting from nearly USD2.4 billion in outflows, 3.0 per cent of assets, experienced by CTA funds in the UK and its offshore islands.
 
For the 12 months ending 31 July, managed futures funds experienced USD20.5 billion in redemptions, 5.7 per cent of assets. Monthly trading gains of USD7.6 billion brought total CTA industry assets to USD327.3 billion at the end of July, up from USD324.8 billion at the end of June.

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