With what appears to be immaculate timing, hedge fund investors turned cautious in April 2018 and redeemed $1.9 billion in assets from the industry, just in time for it to produce positive returns in both April and May.
According to the Barclay Fund Flow Indicator, even as the equities markets rebounded and volatility began to calm down, investors withdrew 0.1% of industry assets, which the firm says levelled off at an all-time high of $3 trillion. In April the BarclayHedge Hedge Fund Index gained 0.49% and in May it was up 0.9%, having ended the first quarter -0.7% year-to-date.
The data is drawn from more than 5,000 hedge funds in the BarclayHedge database and the firm says this is the first net outflow of 2018 and a turnabout from inflows of $6.1 billion (0.2% of assets) in March. Industry assets have climbed 3.3% year-to-date and surged 22.5% over the trailing 12 months, according to the Indicator, a monthly big-picture report on the health of the alternative investments industry.
“Though hedge fund investors seemed a bit skittish in April, the industry has fared well over a longer time frame,” says Sol Waksman, founder and president of BarclayHedge. “Hedge funds took in $26.3 billion (0.9% of assets) year-to-date and $108.2 billion (4.3% of assets) in the trailing 12 months.”
Fixed Income hedge funds enjoyed the heaviest inflows in the trailing 12 months ending in April, adding $31.9 billion (6.8% of assets), the Barclay report estimates. Macro funds suffered the heaviest outflows in the same time span, redeeming $15.6 billion (-7.1% of assets).
At the regional level, hedge funds focusing on the UK had the highest April inflows at $3.3 billion (0.5% of assets), while US-focused funds saw the heaviest outflows, redeeming $1.3 billion (-0.1% of assets).
“Funds focusing on the US had the most redemptions for the second month in a row despite healthy corporate earnings in April and solid economic fundamentals,” Waksman says. “Investors seem to be seeing UK funds as a haven from anxieties about trade and tariffs.”
In the managed futures sector, CTA funds endured a second month of outflows in April even as oil prices hit a 41-month high. Redemptions from CTAs jumped more than fourfold to $1.3 billion (0.4% of assets) by month’s end, according to the Fund Flow Indicator. Industry assets totalled $367.1 billion in April, down slightly from the month before.
“Despite a rough couple of months for CTA funds, the rising tide in worldwide commodity prices is lifting boats across the managed futures sector,” Waksman says. “CTA assets have swelled 11.8% from their interim low of $328.2 billion in October 2014.”