Hedge funds endured their heaviest outflows in more than five years in September despite record highs in US equity indexes and strong consumer sentiment, according to the Barclay Fund Flow Indicator.
Data from more than 5,000 hedge funds in the BarclayHedge database estimated that the hedge fund industry (excluding CTAs) shed USD39.1 billion (-1.3 per cent of assets) in September, reversing inflows of USD21.5 billion (0.7 per cent of assets) the month before.
Industry assets dipped to USD3.06 trillion in September, down from August’s all-time high. Weak demand for hedge funds contrasted with strong demand for equities in September, when US stock indexes hit record heights, according to the Barclay Fund Flow Indicator, a monthly big-picture report on the health of the alternative investments industry.
Though US stocks surged and oil prices rallied to a four-year high in September, other economic indicators underscored the gloomy outlook of the hedge fund industry.
“Hedge fund investors had cause for scepticism with rising interest rates, increasing US deficits in spite of a booming economy, and a slowdown in China negatively impacting emerging economies worldwide,” says Sol Waksman, founder and president of BarclayHedge.
Waksman says that September’s redemptions shrank year-to-date hedge fund inflows to USD2.7 billion (0.1 per cent of assets). By contrast, the industry raked in USD94.8 billion (3.4 per cent of assets) in the first nine months of 2017.
At the sector level, Sector Specific funds had the biggest 12-month inflows at USD15.8 billion (11.6 per cent of assets). Macro funds had the largest 12-month redemptions at USD12.1 billion (-5.5 per cent of assets).
At the regional level, hedge funds based in the US, the UK and their respective offshore islands suffered heavy outflows in September. Investors pulled USD36.1 billion (-2.2 per cent of assets) out of US funds, while UK-based funds redeemed USD11.6 billion (-2.0 per cent of assets).
“Except for a trickle of inflows to Canadian hedge funds, all the global fund categories we track lost assets in September,” says Waksman. “Continental Europe funds shed USD2.8 billion (-0.4 per cent of assets) in September, while Latin America funds gave up USD2.9 billion (-21.8 per cent of assets).”
In the managed futures sector, redemptions from Commodity Trading Advisor (CTA) funds doubled to USD300 million (-0.8 per cent of assets) in September from USD150 million (-0.04 per cent of assets) the month before.
“CTA demand has been tepid since the U.S. dollar began a strong rally in March, though things look better over a wider time frame,” says Waksman. “CTAs added USD11.9 billion (3.4 per cent of assets) year-to-date and USD15.9 billion (4.6 per cent of assets) over the trailing 12 months.”
