January inflows are good news for the hedge fund industry
Since January 2016, the average monthly win-rate (the proportion of funds gaining new assets) for the industry has been near 47%. In January 2020, the industry win-rate was over 52%, a level surpassed only one other time in the prior sixteen months. Additionally, an above average proportion of products, both large and broadly by size, saw inflows which were greater than 5% of AUM. The bottom line is the magnitude and breadth of allocations was solid to begin 2020.
Allocations themes differed between equity and credit universes
While overall breadth of allocations was strong to begin the year, there was far broader interest in fixed income/credit strategies than equity, even though their net flows were similar. Credit strategies had a 63% win-rate in January, while equity strategies had only 48% of products with inflows. The implication being that flows into credit were widespread, while flows into equity were more targeted among a smaller group of funds.
Hedge fund industry flows
Let’s put January’s flows into perspective
Typically, January has not been a major inflow month. In four of the five prior Januaries, the industry experienced net outflows. Prior to that, from 2010-2014 (a time during which every January was positive and the average annual flow for the industry was +$56 billion), the average January inflow was just below $3.5 billion. January’s inflow is the third highest (2011 & 2018, +10.81 billion and +9.98 billion, respectively) since eVestment began tracking monthly flows in 2009. The economic world is certainly in a more volatile and seemingly fragile state to begin the year than we’ve seen in several years, and so it will be interesting to see if this equates to more demand for the hedge fund approach, or whether this January was simply a redistribution of a fraction of the assets which have left the industry in the past two years.
Managed futures still on the hot seat
Platform views of managed futures products (shown on following pages) show this segment has been receiving increased scrutiny on eVestment’s platform. Viewership can ultimately be positive or negative, as it is simply a sign of interest, but it appears views to the segment have been stepping higher since early 2019. Redemptions in January were negative, but not significantly so. There was a mix, however, of products with both elevated inflows and redemptions.
Asia-domiciled funds experienced redemptions in January
This is not a new theme and should not be attributed to recent 2020 events, rather outflows have been persistent from within Asia (primarily out of Singapore) for several months. January’s redemptions appear to be a continuation of redemption pressure which began in July 2019, two months after large losses from within the region.
Industry performance tables – January 2020