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December trading profits help hedge funds drive industry assets to USD4.80tn as 2021 wraps

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The hedge fund industry experienced net outflows in December with USD20.4 billion in redemptions, equivalent to a -0.44 per cent reduction in industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

The hedge fund industry experienced net outflows in December with USD20.4 billion in redemptions, equivalent to a -0.44 per cent reduction in industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

Nevertheless, a USD39.8 billion trading profit in December brought total industry assets to nearly USD4.80 trillion as the month ended. A steady string of nine consecutive months of inflows, together with strong trading profits, increased hedge fund assets in 2021 by almost 23 per cent.

Redemptions were the norm across most hedge fund subsectors in December. Among the subsectors that did see monthly inflows, Equity Long-Only funds added USD6.3 billion, 2.1 per cent of assets, Balanced (Stocks & Bonds) funds took in USD1.4 billion (+0.2 per cent of assets), Equity Long/Short funds saw USD1.3 billion in inflows, (+0.8 per cent of assets), Convertible Arbitrage funds brought in USD866.2 million, (+2.5 per cent of assets), and Emerging Markets – Asia funds added USD190.7 million, (+0.1 per cent of assets).

Subsectors on the redemption side of the ledger in December included Multi-Strategy funds with -USD22.3 billion in outflows, (-4.5 per cent of assets), Event Driven funds which saw -USD2.6 billion exit, (-0.9 per cent of assets), Emerging Markets – Global funds experienced -USD2.2 billion in outflows, (nearly -1.0 per cent of assets), Macro funds with -USD1.8 billion in redemptions,(- 0.9 per cent of assets), and Fixed Income funds which saw -USD1.7 billion in outflows, (-0.2 per cent of assets).

The managed futures industry posted a second consecutive month of redemptions in December with -USD1.7 billion in outflows. Three of four CTA subsectors tracked did see inflows for the month, however. Hybrid CTAs brought in USD368.2 million, (+1.8 per cent of assets), Discretionary CTAs added USD108.3 million, (+0.6 per cent of assets), and Multi Advisor Futures Funds took in USD47.3 million, (+0.4 per cent of assets).

Nevertheless, December’s asset gains in these three subsectors were swamped by redemptions from Systematic CTAs the world-over. The Systematic subsector saw -USD2.2 billion exit during the month, equivalent to shrinkage of -0.7 per cent of sector assets.

For the year, the hedge fund industry experienced USD200.7 billion in net inflows in 2021. A USD215.0 billion trading profit over the 12-month period brought total hedge fund industry assets to the USD4.80 trillion mark, up from USD4.69 trillion at the end of November and USD3.91 trillion a year earlier.

Almost two-thirds of the hedge fund subsectors tracked had net inflows over the calendar year 2021. In dollar terms, the Fixed Income subsector was by far the largest contributor with USD71.7 billion in inflows. Jockeying for second and third place on the podium were Sector-Specific funds and Multi-Strategy funds, swelling USD45.4 billion and USD42.3 billion respectively.

In percentage terms, the picture was a bit different. Convertible Arbitrage funds had the largest proportional growth, expanding AUM by 21.25 per cent in 2021. Merger Arbitrage and Sector Specific funds also enjoyed robust AUM growth of 16.14 per cent and 15.83 per cent respectively. Multi-Strategy funds grew 11.91 per cent and both Emerging Markets-Asia and Option Strategies funds ended 2021 with more than 10 per cent additional investor capital than they started the year with.

Hedge fund subsectors with the largest 12-month redemptions through December included Balanced (Stocks & Bonds) funds with -USD15.6 billion in outflows (-2.8 per cent of assets), Macro funds shedding -USD12.8 billion, (-6.7 per cent of assets), Equity Long-Bias funds experiencing -USD8.8 billion in redemptions, (-2.5 per cent of assets), Emerging Markets – Global funds with -USD6.5 billion in outflows (-5.3 per cent of assets), and Equity Market Neutral funds with -USD3.8 billion in redemptions, (- 6.6 per cent of assets).

The CTA industry added more than USD4.6 billion in new assets in 2021. A USD23.0 billion trading profit over the period brought total industry assets to USD346.6 billion at year end, up from USD302.7 billion a year earlier.

Three of four subsectors posted robust 12-month inflows over the course of 2021. Discretionary CTAs brought in USD3.0 billion (+23.8 per cent of assets), Hybrid CTAs scooped up USD1.8 billion in inflows, (+19.2 per cent of assets), and Multi Advisor Futures funds added USD1.1 billion, (+10.3 per cent of assets). The lone managed futures subsector recording net redemptions in 2021 was Systematic CTAs with -USD214.2 million in outflows, a drop of about -8 basis points in AUM.

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