Hedge fund redemptions gathered pace in October

According to BarclayHedge's Barclay Fund Flow indicator, October redemptions from hedge fund outpaced subscriptions by -$52.97 trillion. This resulted in a 1.12% contraction in industry assets.

The total assets of the hedge fund industry grew to $4.74 trillion with a $71.03 billion trading profit in October.

All but one subsector of hedge funds suffered net redemptions in October, despite an extremely profitable month of trading. The only exception was Emerging Markets-Latin America, which attracted $1.09 trillion in net new capital.

In October, Emerging Markets Asia, Global Macro, Event Driven and Fixed Income funds were the most affected subsectors. Both investor flight and trading losses caused the demise of Emerging Market managers from Asia. All in all, the subsector had assets of 4.55% less after $6.86 billion worth of investor capital fled.

Global Macro programmes recorded more than $2.27 billion in October trading profits. However, the gains were not enough to offset -$3.20 trillion worth of net redemptions for the month. The outflows weighed down on total subsectors AUM by -1.65%.

Event Driven managers had a similar story: Their October training profits reached $5.30 Billion, but they were overwhelmed by investors looking for exits. For a decrease in subsector total AUM of -1.61%, net redemptions totaled $4.05 billion. The net outflows of Fixed Income hedge fund managers were proportionally the same (-1.57%), however, due to the subsector’s relative size, the total inflow was much higher at $13.88 billion.

Managed futures suffered a fifth consecutive month with net redemption activity of -$4.21 trillion (-1.04% assets). This string of losses began in June 2022, and has resulted in a loss of capital for the managed futures sector totaling -$17.68 million.

The four CTA subsectors that were tracked in August were again equally split between those who received net inflows and those who had to redeem their investments. Multi-Advisor Future Funds and Discretionary both received new investment capital (+1.13%) and +1.20%, while Systematic and Hybrid CTAs lost investor capital (-1.21%, -0.73%, respective). The industry balance was tipped by Systematic CTAs with -$4.38 million in net outflows.

The hedge fund industry redeemed $257.86 million in redemptions for the twelve months to October. A $531.59 Billion trading loss during the period brought the total industry assets to $4.74 Trillion as of October 31, up from $4.71 TILLION in September and $4.68 TILLION a year ago.

Through October, Merger Arbitrage funds remained the nominal 12-month flow leader with $9.62 billion (+0.31%) of assets. Convertible Arbitrage fund, however, is the clear winner for the greatest relative growth. They have amassed a remarkable +15.30% swelling in their assets and picked up $5.13 billion combined over the twelve-month trailing period. Multi-Strategy fund, which attracted $7.43 billion in new capital, was another investor-darling, adding +1.53% to their coffers. Option Strategies funds brought in $1.23 Billion (+2.49% assets) and Emerging Market-Latin American funds reported $783.61 Million in inflows, which represents an increase of +7.58% of the subsector’s assets.

The subsectors that experienced the greatest 12-month outflows were those with Fixed Income funds. They have lost a total of -$111.55 trillion in capital during the previous twelve months. This sub-sector has a total asset shrinkage rate of -11.07%. Balanced (Stocks & Bonds), funds suffered the second-largest loss (-27.89 billion) and outflows of -4.06%. With a loss of -$26.01 trillion (-6.87% assets), Equity Long Bias funds were not far behind. The Emerging Market Global subsector was hit with net outflows of -$23.46 trillion. This makes them proportionally the most severely affected subsector in hedge funds, with an asset contraction rate of -11.14%. Global Macro funds lost -8.85% of their assets and Equity Long/Short funds saw a net loss of -$17.93 Billion (-10.11%). The industry's assets were 3.30% less than the $11.75 billion that managed futures received in redemptions over the 12-month period ending October. A $43.90 Billion trading profit contributed to total industry assets of $398.01Billion, an increase from $346.14B a year ago.

Systematic CTAs remained the only sector to show net redemptions over the twelve-month trailing period. With an aggregate investor flight of $18.69 billion (-5.75%), the Systematic subsector was still a victim to redemption pressures. Discretionary CTAs received $6.57 billion combined in net subscriptions, for a +37.28% increase in their assets. Multi Advisor Futures Funds brought in $3.65 Billion to increase their assets by +28.91%. Although hybrid CTAs are still growing, they are doing so in a more modest manner. They have received $297.09 Million in net subscriptions (+1.53%)