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Hedge funds reverse two-month redemption trend with USD21.2bn inflows in January

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The hedge fund industry experienced USD21.2 billion in inflows in January, reversing a two-month redemption trend in a turnaround from December’s USD29.0 billion in redemptions.January’s inflows represented 0.7 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

A January trading profit of USD6.8 billion brought total hedge fund industry assets to more than USD3.26 trillion as January came to a close, up from USD3.19 trillion at the end of December.

January’s industry inflows were fueled largely by hedge funds in the US and its offshore islands, which took in USD20.7 billion during the month from investors heartened by a November stock market rally. Data from 7,100 funds (excluding CTAs) in the BarclayHedge database showed hedge funds in Continental Europe, Canada and Latin America adding to the net inflow total.

“Heading into a new quarter and a new year, investors’ confidence was buoyed by U.S. equity markets’ best performance since June,” says Sol Waksman, president of BarclayHedge. “An October Fed rate cut and positive data on retail sales and housing starts boosted spirits further. Meanwhile, in Europe, the economic news out of Germany was just good enough to ease investors’ recession fears.”

Over the 12-month period ending in January, the hedge fund industry experienced USD64.3 billion in redemptions, 2.2 per cent of industry assets. A USD191.6 billion 12-month trading profit brought industry assets to USD3.26 trillion as January ended, up from USD2.96 trillion a year earlier.

Most hedge fund sectors experienced net redemptions over the 12-month period through January, though two bucked the trend. Event Driven funds brought in USD32.7 billion, 23.4 per cent of assets, over the period, followed by Balanced (Stocks & Bonds) funds which added USD8.3 billion, 2.9 per cent of assets.

Sectors with the largest 12-month redemptions included Equity Long/Short funds with USD37.7 billion in outflows, 17.9 per cent of assets, Equity Long Bias funds which shed USD17.1 billion, 5.3 per cent of assets, and Equity Market Neutral funds which saw outflows of USD14.6 billion, 15.6 per cent of assets.

The managed futures industry had a different experience in January, reversing December’s net inflows with USD1.5 billion in redemptions. A USD1.0 billion January trading loss left industry assets at USD315.7 billion as January ended, down from USD318.4 billion a month earlier.

“Volatility aside, equity markets had a strong year in 2019, leading some investors to reduce exposure to managed futures,” says Waksman.

CTA redemptions were the norm in most regions in January, led by funds in the U.S. and its offshore islands which experienced nearly USD1.7 billion in redemptions, 0.8 per cent of assets.

While managed futures redemptions were the norm in most regions of the world in January, the picture was brighter in the UK and its offshore islands where CTAs took in USD248.6 million, 0.4 per cent of assets, and in Japan where managed futures funds experienced USD21.3 million in inflows, 5.2 per cent of assets.

For the 12-months through January, CTA funds experienced USD15.6 billion in outflows, 4.4 per cent of assets. A USD17.2 billion trading profit over the period contributed to bringing total industry assets to the USD315.7 billion figure at the end of January, down from USD350.8 billion a year earlier.

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