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Hedge fund flows turn positive again in May

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Hedge funds reversed a brief two-month redemption trend in May with USD800 million in industry inflows, a turnaround from April’s USD9.4 billion in redemptions, according to Barclay Fund Flow Indicator published by BarclayHedge.

While the fund flow needle turned upward in May, the month’s inflows represented a negligible portion of industry assets.

Strong US economic indicators, an equity market rally that saw the S&P 500 making up ground lost in late 2018 and four consecutive profitable months for hedge funds was enough to overcome the redemption impact of Brexit worries and worries over an economic slowdown elsewhere in the world.

Data from the nearly 6,000 funds (excluding CTAs) included in the BarclayHedge database showed flow activity evenly mixed among regions of the world in May. The USD10.6 billion in inflows to hedge funds in the US and its offshore islands, 0.7 per cent of assets, went a long way toward offsetting the impact of USD7.5 billion in redemptions in Continental Europe, 1.1 per cent of assets, and USD5.8 billion in May outflows, 1.0 per cent of assets, in the UK and its offshore islands.

“An equity market rally coupled with strong US economic news – highlighted by first quarter economic growth exceeding expectations – drove U.S. hedge fund investment and tipped the global balance toward hedge fund inflows in May,” says Sol Waksman (pictured), president of BarclayHedge. “That said, ongoing Brexit concerns and downward revisions of economic growth projections in Europe and China drove redemptions in other regions of the world.”

For the 12 months ending 31 May, the hedge fund industry saw USD151.0 billion in redemptions, 5.0 per cent of industry assets.

While redemptions remained the norm for most hedge fund sectors over the 12-month period ending May 31, three sectors did post net inflows for the period. Macro funds experienced USD15.6 billion in inflows, 7.6 per cent of assets, over the 12 months, while Event Driven funds took in USD9.9 billion, 6.9 per cent of assets, and Merger Arbitrage funds added nearly USD902 million, 1.4 per cent of assets.

Investor concerns with regard to continued Fed tightening and doubts about whether the 10-year long bull market in equities was coming to an end continued to be reflected in the redemption trends of several sectors. Equity Long/Short funds experienced USD31.1 billion in outflows, 13.9 per cent of assets, Fixed Income funds saw USD28.1 billion in redemptions, 4.9 per cent of assets, Balanced (Stocks & Bonds) funds saw USD27.8 billion in outflows, 11.3 per cent of assets, and Equity Long Bias funds saw 12-month redemptions totalling USD25.8 billion, 8.0 per cent of assets.

For managed futures funds the redemption trend extended to 11 months in May. The month’s redemptions stood at USD3.8 billion, 1.2 per cent of assets, up from USD400 million in April outflows. For the 12-month period ending 31 May, managed futures funds experienced USD17.7 billion in redemptions, 4.8 per cent of assets.

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