Hedge funds return to net redemptions in November with USD4.7bn outflows

After a one-month reprieve, the hedge fund industry returned to net outflows in November with USD4.7 billion in redemptions, a reversal from October’s USD1.9 billion in industry inflows.

November’s redemptions represented 0.2 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A USD19.1 billion November trading profit brought total hedge fund industry assets to more than USD3.16 trillion as the month ended, up from USD3.13 trillion at the end of October.

November’s redemptions were driven by numerous economic events and indictors that worried investors as summer came to a close, prompting sizeable redemption volumes from funds in the U.K., the US and China.

November data from the nearly 7,100 funds (excluding CTAs) in the BarclayHedge database showed investors pulling USD6.2 billion from funds in the U.K. and its offshore islands, USD4.4 billion from funds in the US and its offshore islands and USD1.0 billion from funds in China.

“The last weeks of summer posed a number of challenges for investors including the impact of heightened trade tensions between the US and China on equity markets, reports of shrinking economies in the UK and Germany, ongoing Brexit uncertainty and recession fears prompted by an inverted yield curve,” said Sol Waksman, president of BarclayHedge. 
    
For the 12 months ending 30 November, the hedge fund industry experienced USD122.9 billion in redemptions, 4.0 per cent of assets. A USD182.6 billion trading profit over the 12-month period contributed to the industry’s USD3.16 trillion in total assets as November ended, up from nearly USD3.09 trillion a year earlier.

Most hedge funds sectors experienced redemptions for the 12-month period, though a few bucked the trend. Sectors posting 12-month inflows included Macro funds which added USD22.4 billion, 6.9 per cent of assets, Event Driven funds with USD22.2 billion in inflows, 15.7 per cent of assets, and Emerging Markets – Latin America funds which took in USD1.6 billion, 14.9 per cent of assets.

Relative underperformance against their benchmarks by hedge funds in equity and fixed income sectors continued to be reflected in the funds posting the largest 12-month redemptions. Equity Long/Short funds led the way with USD40.7 billion in redemptions, 18.5 per cent of assets, followed by Equity Long Bias funds which shed USD37.5 billion over the period, 11.4 per cent of assets, and Fixed Income funds which experienced USD19.5 billion in 12-month redemptions, 3.5 per cent of assets.

The managed futures industry also experienced net outflows in November with USD905.8 million in redemptions. A USD3.0 billion trading profit for the month brought total industry assets to USD310.2 billion as November ended, up from USD305.4 billion at the end of October.

“Back-to-back losses in September and October on the back of uninspiring year-to-date returns pushed some investors to redeem in November,” says Waksman.

CTA redemptions were the norm in most regions in November, led by the U.K and its offshore islands which saw USD1.4 billion in redemptions, 2.4 per cent of assets. CTAs in Asia excluding China and Japan shed USD264.4 million during the month, 3.4 per cent of assets, while funds in Continental Europe experienced USD125.0 million in redemptions, 0.4 per cent of assets.

Among the regions running counter to the redemption trend, CTAs in the US and its offshore islands took in USD399.9 million, 0.2 per cent of assets, in November.

For the 12 months ending Nov. 30, CTA funds experienced USD17.3 billion in outflows, 4.9 per cent of industry assets. A USD16.7 billion trading profit over the period contributed to the industry’s USD310.2 billion in total assets at the end of November, which was down from nearly USD350.7 billion a year earlier.