Hedge Funds Couldn’t Build on May Inflows as U.S.-China Trade War Impacts Equity Markets According to Barclay Fund Flow Indicator

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CTA funds’ run of monthly net redemptions reaches 12 straight months in June

Hedge funds were unable to build on the previous month’s inflows in June with the industry moving back into net redemption territory with $12.2 billion in outflows for the month.

June redemptions, which represented 0.4% of industry assets, were a reversal from May’s $800 million in hedge fund industry inflows, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.

The ongoing U.S.-China trade war which began to manifest itself in signs of slowing industrial and consumer demand in the U.S. and China, falling oil prices and an equity market plunge this spring factored heavily in June’s redemption activity.

Data from the nearly 6,000 funds (excluding CTAs) included in the BarclayHedge database showed June’s worldwide redemption trend driven largely by three regions. In the U.S. investors pulled $6.2 billion, 0.4% of assets, from hedge funds in June. In Europe and the U.K., Brexit uncertainties added an additional drag, with hedge funds in Continental Europe seeing monthly outflows of $2.7 billion, 0.4% of assets, while in the U.K. and its offshore islands hedge funds experienced $1.5 billion in redemptions, 0.3% of assets.

“Uncertainty over the economic consequences of the ongoing U.S.-China tariff battle led skittish investors to pull back in June,” said Sol Waksman, president of BarclayHedge. “In Europe, while several economies in Eastern Europe continue to exceed expectations, it wasn’t enough to overcome Brexit’s impact on the U.K. and Germany.”

For the 12 months ending June 30, the hedge fund industry experienced $154.2 billion in redemptions, 5.1% of industry assets.

Most hedge fund sectors continued to post net redemptions for the 12-month period ending June 30, though a few sectors bucked the trend. Macro funds realized $16.3 billion in inflows for the 12 months, 8.0% of assets, while Event Driven funds experienced $10.6 billion in inflows, 7.3% of assets, and Emerging Markets – Asia funds took in $1.0 billion, 0.9% of assets. Merger Arbitrage funds experienced $600 million in inflows over the 12 months, 1.0% of assets.

Bond and equity market volatility continued to be reflected in the 12-month flow experience of several sectors, including Equity Long Bias funds with $33.8 billion in outflows, 10.1% of assets, Balanced (Stocks & Bonds) funds with $29.8 billion in redemptions, 12.2% of assets, Equity Long/Short funds with $29.2 billion in 12-month outflows, 13.6% of assets, and Fixed Income funds with $24.6 billion in outflows over the period, 4.3% of assets.

Managed futures funds’ monthly redemption trend extended to 12 straight months in June with $2.1 billion in outflows for the month representing 0.7% of industry assets. While the CTA redemption trend slowed in some regions in June – and some even experienced net inflows – the month’s global net outflows largely resulted from $2.4 billion in redemptions from funds in the U.K. and its offshore islands where investors’ worries of a no-deal Brexit continue to mount.

For the 12-months ending June 30, managed futures experienced $20.2 billion in redemptions, 5.5% of assets.

The monthly Barclay Fund Flow Indicator, published by BarclayHedge, can be found here.

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