The pace of Hedge Fund redemptions accelerated slightly in August to -$18.92 billion (-0.38% of industry assets), according to the Barclay Fund Flow Indicator published by BarclayHedge.
- Hedge fund net redemptions accelerated slightly in August to -$18.92 billion, equivalent to a -0.38% reduction in AUM
- Fixed income funds saw the largest net outflows again this month, shedding -$3.63 billion
- While net redemptions were largely the norm in August, merger arbitrage, multi-strategy and Latin American emerging markets funds all attracted net new investments
The pace of Hedge Fund redemptions accelerated slightly in August to -$18.92 billion (-0.38% of industry assets), according to the Barclay Fund Flow Indicator published by BarclayHedge.
A trading loss of -$54.13 billion during August saw total hedge fund industry assets decline to $4.96 trillion. Including new fund launches though, total industry AUM remains just 3.4% lower than the $5.136 trillion all-time high recorded in March of this year.
With a handful of exceptions, net redemptions from hedge funds were the largely the norm in August. Among those attracting net new investments were merger arbitrage funds, bringing in $0.98 billion, multi-strategy funds, with $0.37 billion in inflows, and Latin American emerging markets funds, which added approximately $130 million. Convertible arbitrage funds meanwhile, picked up around $90 million in August and distressed securities funds were effectively flat.
Among the much larger group of subsectors experiencing net outflows in August, almost half suffered net redemptions of $1 billion or more.
Fixed income funds were hardest hit, shedding $3.63 billion. followed by various equity strategies: equity long bias funds saw $2.24 billion in outflows; equity long/short funds were down $2.16 billion; and equity long-only funds lost $2.12 billion.
Away from equities, global emerging markets lost $1.93 billion of assets and equity market neutral funds finished the month $1.85 billion lighter. Managers who work a blend of equity and fixed income strategies meanwhile, suffered a double-whammy as investors trimmed their exposure to both, leaving balanced (stocks & bonds) funds down $1.76 billion, with option strategies and sector specific managers losing $1.58 billion and $1.20 billion in investor capital, respectively.
The managed futures industry posted a third consecutive month of net redemptions with $4.44 billion in August outflows, while systematic CTAs, which had net redemptions totalling $4.60 billion, were the driving force behind the industry’s loss of investor capital in August. Hybrid CTAs also lost capital but at about half the rate of that seen among their fully-systematic counterparts, losing around $170 million in investor capital over the month.
Discretionary and multi-advisor funds both picked up assets in excess of 1% of their global AUM total, while discretionary CTAs had net subscriptions of approximately $0.32 billion and multi-advisor futures funds were up $0.25 billion. The flow of new assets though, was insufficient to counterbalance redemptions from the much larger systematic subsector.
For the trailing 12 months through August 2022, hedge fund industry net redemptions totalled $119.64 billion which amounted to a reduction in industry AUM of 2.65%. A combined $423.08 billion trading loss over the 12-month period brought total industry assets under management to $4.96 trillion by month-end, down from $4.99 trillion at the end of July but still up from $4.53 trillion a year earlier.
Multi-strategy funds have dominated all other hedge fund subsectors (in dollar terms) having picked up more than $34.41 billion in new assets. This healthy total though, amounts to an overall increase in AUM of 7.34% which is modest when compared with the growth seen in some other subsectors. In proportional terms, convertible arbitrage funds are the clear winner here, with an increase in AUM of 21% since the beginning of September 2021, which equates to $6.62 billion more in subscriptions than redemptions. Merger arbitrage funds have also seen impressive growth over the trailing twelve-month interval, adding $13.05 billion (14.86%) in net subscriptions.
Top of the ‘unloved by investors’ list are fixed income funds, with the subsector down $72.44 billion (7.34% of net assets) since September 2021. That total accounts for more than $6 of every $10 dollars in net redemptions suffered by the whole hedge fund industry over this period.
Proportionally speaking, Fixed income’s woes are eclipsed by just two others, both of the emerging markets variety: emerging markets – Latin America and Emerging Markets – Global, which have seen redemptions totalling 13.79% and 10.23%, respectively.
Over the trailing twelve-months ending in August, the managed futures industry has suffered a combined $5.22 billion (-1.54%) fall in AUM. A $47.32 billion trading profit over the period contributed to the $395.1 billion in total industry assets meanwhile, up from $342.99 billion a year earlier.
Systematic CTAs, which represent the biggest subsection by far in the hedge fund universe, have seen $11.35 billion in net outflows since September 2021, which although significant in dollar terms, represents a relatively low 3.64% decline.
By comparison, over the trailing twelve-months, discretionary CTA AUM is up by more than 30% ($5.13 billion); multi advisor futures funds have grown assets by more than 21% ($2.71 billion); and Hybrid CTAs have attracted 5% ($930 million) more in investor capital. Nevertheless, the $11 billion in net redemptions taken from systematic CTAs dwarfs the almost $9 billion in net subscriptions garnered by the rest of the industry.
Key Takeaway | While an unbroken trend of redemptions dating back to February 2022 has sapped more than $166bn from hedge fund managers, capital flight might have been far more pronounced, given the general malaise that has hit most markets this year
