Hedge funds experience USD9bn in redemptions in February

Hedge fund flows reversed course in February with USD9.0 billion in redemptions, following USD30.5 billion in industry inflows a month earlier.

February’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 USD42.8 billion monthly trading profit brought total hedge fund industry assets to nearly USD4.03 trillion as February ended.

Despite the month’s industrywide trend, most hedge fund sectors actually experienced net inflows in February, with data from 6,900 funds (excluding CTAs) in the BarclayHedge database showing Fixed Income funds setting the pace with USD8.9 billion in inflows, while Sector Specific funds added USD8.4 billion and Event Driven funds brought in USD8.3 billion in new assets. But USD48.2 billion in redemptions from Balanced (Stocks & Bonds) funds largely set the direction of the industry’s outflow trend in February.

“A Covid-19 surge in the final months of 2020 that saw US Covid deaths and hospitalisations hit record levels in December left investors skittish,” says Sol Waksman, president of BarclayHedge. “The pandemic spike produced a variety of bad economic news, including rising US jobless claims and declining retails sales as economies slowed in the US and Europe as the year ended.”

Over the 12-month period through February, the hedge fund industry experienced USD62.8 billion in net redemptions. A USD294.5 billion trading profit over the period brought total industry assets to nearly USD4.03 billion as the month ended, up from USD3.91 billion at the end of January and USD3.21 trillion a year earlier.

Seven hedge fund sectors posted 12-month inflows through February. Sector Specific funds set the pace bringing in USD48.6 billion, 26.7 per cent of assets, while Emerging Markets – Asia funds added USD20.8 billion, 17.8 per cent of assets, and Fixed Income funds saw USD13.9 billion in inflows, 2.1 per cent of assets.

Other sectors with 12-month inflows included Event Driven funds which added USD13.0 billion over the period, 7.0 per cent of assets, Convertible Arbitrage funds which experienced USD7.1 billion in inflows, 28.9 per cent of assets, Merger Arbitrage funds which took in USD2.0 billion, 2.7 per cent of assets, and Emerging Markets – Latin America funds which brought in nearly USD377.8 million, 3.0 per cent of assets.

Sectors with the largest 12-month redemptions included Balanced (Stocks & Bonds) funds with USD48.3 billion in outflows, 12.2 per cent of assets, Equity Long Bias funds which shed USD24.9 billion, 7.2 per cent of assets, Macro funds with USD24.0 billion in redemptions, 12.5 per cent of assets, and Equity Long/Short funds which saw USD19.4 billion in outflows, 10.3 per cent of assets.

Managed futures funds experienced a fourth consecutive month of inflows in February adding USD1.7 billion in new assets. Three of four CTA sectors tracked experienced inflows for the month.

Systematic CTAs added USD1.1 billion, 0.4 per cent of assets, Discretionary CTAs brought in USD512.2 million, 3.9 per cent of assets, and Hybrid CTAs saw USD94.4 million in inflows, 0.9 per cent of assets.

The lone sector experiencing net redemptions in February was Multi Advisor Futures Funds with USD15.8 million in outflows, 0.1 per cent of assets.

For the 12-month period, CTAs experienced USD633.3 million in inflows. A USD3.5 billion trading profit over the period contributed to the managed futures industry’s USD309.7 billion in total assets, up from USD307.9 billion a year earlier.