According to eVestment, redemption pressures continue for equity & credit, macro/managed futures enjoy strong inflows.
Total hedge fund assets increased 0.22% in the first month of 2015 bringing the industry’s total asset under management to $3.033 trillion. The flow of investor assets was nearly flat on a net basis in January, but there were elevated redemptions and allocations occurring across major strategies.
Investors added $1.19 billion into hedge funds during the month. Light flows in January have been the norm over the last five years with the lowest levels of inflows, and/or highest outflows occurring around year-end and half year-end, while the largest inflows have consistently been recorded in February and August.
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Hedge funds redemption pressures continue
January flows showed a continuation of the redemption pressures on funds with equity and credit exposures, but for different reasons. Long/short equity funds experienced their largest outflow of money since December 2009, losing $7.3 billion. Flows were at a similarly elevated level just one month prior to end 2014.
Disappointing performance appeared to be the driver of redemptions from long/short equity strategies in January. 65% of long/short equity funds had negative returns in the second half of 2014, but these funds accounted for 96% of all net outflows from the strategy in January.
For credit strategies, redemption pressures from performance issues could be expected as the universe has endured six months of negative or flat returns. However, redemptions from the group in January were not necessarily concentrated amongst those posting losses in the second half of 2014. Among the funds driving the universe’s outflows in January were those focused on securitized credit markets. Unlike the broad redemption pressures facing poor performing equity hedge funds, credit investors appear to have removed money from a particular market exposure in January, but in many cases remained, or added to strategies despite near-term drawdowns.
Inflows in managed futures funds
It is difficult to tell exactly when investor sentiment shifted positive in favor of managed futures funds, but the resulting inflow of assets appeared to begin in January. January’s current estimated inflow of $3.9 billion will likely stand as their largest monthly inflow since February 2012 and second largest since pre-financial crisis. New allocations went primarily to the largest managed futures funds. Those with greater than $1 billion in AUM received over $4 billion in January while their smaller counterparts had aggregate net redemptions.
Macro funds also experienced a return of positive investor sentiment in January, but not quite at the same level as managed futures strategies, and received $2.5 billion during the month. One similarity to managed futures’ flows was that investors showed a preference for allocating to large funds while removing money from smaller managers.
After facing slight redemption pressure in December, multi-strategy hedge funds continued their trend of being a primary driver of new assets coming into the hedge fund industry. The universe received $5.0 billion in new assets in January, their best start to a year since before the global financial crisis.
The trend of outflows facing the European hedge fund industry continued into its seventh consecutive month in January. Redemptions came from funds across multiple strategies, but it appears exposure to European markets was among the main drivers of redemptions.