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Hedge fund redemptions down again in May

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Hedge fund redemptions continued to decline from their Covid-19 pandemic-fuelled peak of USD85.6 billion in March. Net redemptions in May were USD8.0 billion, 0.3 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.In spite of the redemptions, the hedge fund industry continued to grow. Assets under management rose to USD3.04 trillion, up from USD2.99 trillion a month earlier based on trading profits of USD49.9 billion in May.

Data from 7,000 funds (excluding CTAs) in the BarclayHedge database showed funds in the US and its offshore islands again shaping the hedge fund industry flow trend in May, as funds in the region experienced more than USD8.5 billion in redemptions. Investors drew another USD1.2 billion from funds in the UK and its offshore islands. Elsewhere in the world, investors added nearly USD3.0 billion to funds.

“As the Covid-19 pandemic spread, economies shut down, retail sales and services collapsed, unemployment levels stayed extremely high and many hedge fund investors chose to look for opportunities elsewhere,” says Sol Waksman, president of BarclayHedge. 

Over the 12-month period through May, hedge funds experienced USD196.8 billion in redemptions. May’s USD49.9 billion trading profit brought the industry’s 12-month investment performance into positive territory with an USD8.5 billion profit. Total industry assets of USD3.04 trillion at the end of May were up from USD2.99 trillion at the end of April, though down from nearly USD3.07 trillion a year earlier.

Only four hedge fund sectors posted 12-month inflows. Event Driven funds brought in USD22.3 billion, 14.0 per cent of assets, Sector Specific funds added USD10.4 billion, 6.1 per cent of assets, Convertible Arbitrage funds saw USD3.1 billion in inflows, 15.6 per cent of assets, and Emerging Markets – Latin America funds brought in USD1.4 billion, 12.4 per cent of assets.

Sectors with the largest 12-month redemptions included Fixed Income funds with USD45.5 billion in outflows, 7.2 per cent of assets, Equity Long/Short funds with USD42.6 billion in redemptions, 20.7 per cent of assets, and Equity Long Bias funds which shed USD25.6 billion, 7.9 per cent of assets.

As in April, the managed futures industry fared better than hedge funds in May with USD1.3 billion in inflows, a slight drop from the USD1.5 billion CTAs added a month earlier. A USD900 million trading loss brought industry assets to USD284.1 billion, up from USD280.8 billion a month earlier.

CTAs in the US and its offshore islands set the pace for May, bringing in USD1.6 billion, 1.0 per cent of assets. Funds in Continental Europe also added assets during the month with USD85.4 million in inflows, 0.3 per cent of assets. Among the regions experiencing net CTA outflows, managed futures funds in the UK and its offshore islands experienced USD306.0 million in redemptions, 0.5 per cent of assets.

Over the past 12 months, the managed futures industry experienced USD25.3 billion in redemptions, 4.6 per cent of industry assets. A USD4.6 billion 12-month trading loss brought total industry assets to that USD284.1 billion figure at the end of May, down from USD320.7 billion a year earlier.

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