The hedge fund industry posted an estimated inflow of USD13.0 billion (0.8% of assets) in November 2010, the fifth straight inflow as well as the heaviest since February 2010, according to the latest figures released by TrimTabs Investment Research and BarclayHedge.
“The year ahead looks bright for the hedge fund industry,” says Sol Waksman, founder and President of BarclayHedge. “Hedge funds returned 11.6% in 2010, and investors continue to pump money into the space. Additionally, we suspect pension managers will need to chase active returns because plans are underfunded and market yields are far too low to get the job done.”
Equity long-short funds hauled in USD2.5 billion (1.3% of assets) in November 2010, the heaviest inflow of any hedge fund strategy, while event driven funds took in USD2.2 billion (1.0% of assets) and emerging markets funds received USD1.8 billion (0.8% of assets). Meanwhile, fixed income funds attracted USD1.9 billion (1.2% of assets), the seventh straight inflow.
“Hedge fund investors have been much less bearish on bonds than mom and pop,” says Vincent Deluard, Executive Vice President of Research at TrimTabs. “Retail investors have been dumping muni, Treasury, and multisector bond mutual funds since prices started to tank, but seasoned market participants have yet to redeem fixed income assets. We are fundamentally bearish on bonds, but we expect to see bouts of bullishness when the economic outlook seems uncertain and crises in Europe bubble to the surface.”
Commodity trading advisors (CTAs) posted an outflow of USD3.9 billion (1.4% of assets) in November, the first in nine months, although the redemption owed to a single large fund. Funds of hedge funds took in USD473 million (0.1% of assets), the fifth straight inflow. Meanwhile, hedge fund managers could help juice equities in 2011.
“We estimate that about 50% of hedge fund managers will collect fees for their performance in 2010,” noted Deluard. “This is better than just 32% in 2009 and only 16% in 2008, but it is nowhere near the record 90% we saw in 2006. We think many managers are likely to invest aggressively in 2011. If they do, their purchasing will be a plus for asset prices.”
