Hedge fund redemptions skyrocket in March as investors pull USD85bn amid Covid-19 pandemic fears, new data shows

Redemptions

Investors pulled more than USD85 billion out of hedge funds during March – some 2.7 per cent of total industry assets globally – amid growing fears over the economic impact of the coronavirus pandemic, new data from BarclayHedge shows.

Investor redemptions skyrocketed from USD8.1 billion in February to USD85.6 billion the following month, with hedge funds in continental Europe the hardest hit, according to BarclayHedge’s Barclay Fund Flow Indicator.

Continental European hedge fund managers suffered outflows of USD38.3 billion, while across the Atlantic US hedge funds recorded USD31.6 billion in redemptions. Funds in the UK meanwhile lost USD24.7 billion in redemptions.

The withdrawals piled on further agony in what was a miserable Q1 for the hedge fund industry, with hedge fund strategies of all stripes suffering steep falls in performance during the market maelstrom.

A March trading loss of some USD229.1 billion reduced the total amount of hedge fund industry assets globally to USD2.86 trillion, down from USD3.21 trillion at the end of February.

More recently, industry performance dramatically rebounded in April, with hedge funds sailing to a 5.46 per cent gain, the Barclay Hedge Fund Index shows.

“As the magnitude of the Covid-19 crisis became increasingly clear through January and February, equity market volatility increased, oil prices plunged and the economic fallout mounted,” said Sol Waksman, president of BarclayHedge. “Ultimately that volatility left investors with shrinking risk appetites and many decided it was time to hold cash. The result was hedge fund redemptions hitting their highest levels since the 2008-09 financial crisis.”

In the 12 months to the end of March, investors ultimately yanked a total of USD159.2 billion from hedge funds, BarclayHedge noted.

A USD142.8 billion trading loss over the period brought industry assets to nearly USD2.86 trillion at the end of March, down from USD3.01 trillion a year earlier.

Still, a handful of strategies finished March with 12-month inflows, reflecting the considerable strategy dispersion that frequently underpins the hedge fund industry.

Event driven managers enjoyed USD27.8 billion of annual inflows – almost 20 per cent of assets - while sector-specific funds, such as healthcare and telecoms, drew in USD7.6 billion or 4.4 per cent of assets.
On the flipside, equity long/short manager suffered the steepest investor outflows over the 12-month period, with USD40.2 billion - or 19.2 per cent of assets – being pulled annually.

Allocators also balked at fixed income hedge funds, which shed USD38.4 billion or 6.6 per cent of assets, as well as macro funds which lost USD15.1 billion in outflows, or 8.1 per cent of assets.