The hedge fund industry posted an estimated inflow of USD4.0bn, or 0.3 per cent of assets, in May 2010, the third inflow in four months, according to TrimTabs Investment Research and BarclayHedge.
But poor performance drove industry assets to USD1.58trn in May from USD1.61trn in April, the first decline since July 2009.
“Performance was poor in May,” says Sol Waksman, chief executive of BarclayHedge. “Hedge funds posted a negative return of 3.2 per cent, the worst since October 2008. But flow data won’t show a hit until June because most funds allow redemptions only on a quarterly basis.”
The TrimTabs/BarclayHedge survey of hedge fund managers for June reveals that only 19 per cent of 127 respondents are bullish on the S&P 500, while 37 per cent are bearish. Only 36 per cent are bullish on the US dollar, down from 49 per cent in May. Additionally, 46 per cent of hedge fund managers cite Spain as the next Greece, while only 20 per cent think Portugal will earn the honour.
“That ranking surprises, as Spain’s credit-default swap premium is smaller than Portugal’s,” says Vincent Deluard, executive vice president at TrimTabs. “But our results reveal no ‘homer’ bias – a majority of managers in every geographic region we surveyed like Spain to be the next European domino.”
In May, funds of hedge funds and commodity trading advisers posted inflows for the third straight month. Investors showed a much smaller appetite for risk, as emerging markets funds posted the largest outflow of any strategy as well as their first outflow since July 2009. In contrast, fixed income funds posted an inflow of USD2.9bn, the largest inflow of any strategy.
“Fixed income funds are up 5.1 per cent this year, far and away the best performance of any strategy,” says Deluard. “But there’s little meat left on that bone. The yield curve has flattened to a level not seen since April 2009, and ten-year Treasuries have dipped below three per cent. Moreover, USD691bn in bond mutual funds and ETFs stands ready to flee the sector.”
