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Hedge fund redemptions slow in April

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The pace of hedge fund redemptions slowed in April but continued for a second straight month with USD9.4 billion in net outflows worldwide, down from USD11.0 billion in March. Despite the outflows, industry assets under management increased to more than USD3.09 trillion due to USD33.6 billion of trading profits for the month.

April redemptions represented 0.3 per cent of hedge fund industry assets, according to the Barclay Fund Flow Indicator, published by BarclayHedge, a division of Backstop Solutions.

Recession fears stoked by an inverted yield curve, threats of escalation in the US-China trade dispute and ongoing uncertainty over the UK’s Brexit outcome and its subsequent fallout all contributed to April’s redemptions.

Data from the nearly 6,000 hedge funds (excluding CTAs) included in the BarclayHedge database showed flow activity mixed among regions of the world in April, with several actually experiencing net inflows. The lion’s share of April redemptions included USD6.3 billion in redemptions from hedge funds in the UK and its offshore islands representing 1.1 per cent of assets and hedge funds in Asia excluding China and Japan shedding USD4.9 billion in redemptions.

Elsewhere in the world, hedge funds in the US and its offshore islands took in nearly USD3.8 billion in April, 0.2 per cent of assets, while funds in China and Hong Kong added more than USD1.0 billion, 1.7 per cent of assets,

“In the US, investors were heartened by a rebounding equity market, but in the UK and Europe the tune’s become all too familiar; Brexit and slowing growth in the Eurozone,” says Sol Waksman, president of BarclayHedge.

For the 12 months ending April 30, the hedge fund industry saw total redemptions of USD147.8 billion, 4.9 per cent of industry assets.

Macro funds set the pace for inflows over the 12 months ending April 30 taking in USD15.1 billion, 7.3 per cent of assets. Event Driven funds added 4.7 per cent to assets over the 12 months taking in USD6.8 billion, while Merger Arbitrage funds took in USD2.2 billion, adding 3.3 per cent to assets over the period.

Not surprisingly, the largest 12-month redemptions were driven by volatility in bond and equity markets. Fixed Income funds saw USD30.1 billion in redemptions over the 12 months, 5.3 per cent of assets, Balanced (Stocks & Bonds) funds experienced USD26.7 billion in outflows, 10.8 per cent of assets, Equity Long/Short funds saw 12.0 per cent of assets – USD26.4 billion – redeemed and Equity Long Bias funds reported USD24.3 billion in redemptions, 7.7 per cent of assets.

Emerging markets funds also found themselves caught up in global events. Notably, Emerging Markets – Global funds saw 12-month redemptions of USD15.7 billion, 11.2 per cent of assets. 

“Trade-reliant emerging markets, particularly in Asia, have found themselves swept up in the effects of the US-China trade battle, while tighter global financing conditions and a strengthening USD have added to the challenges faced by those countries,” says Waksman.

For managed futures funds the monthly redemption trend extended to a full year in April with the industry experiencing USD400 million in outflows, 0.1 per cent of assets. Over the 12 months ending April 30, managed futures funds saw USD13.4 billion in net redemptions, 3.6 per cent of assets. Total managed futures industry assets stood at USD331.0 billion as April ended.

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