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Sol Waksman, founder and President of BarclayHedge

Hedge funds take in USD8.1bn in May

The hedge fund industry posted an inflow of USD8.1 billion (0.5% of assets) in May 2011, according to the latest report from BarclayHedge and TrimTabs Investment Research. The inflow marks the fifth straight as well as the seventh in eight months. Industry assets remain unchanged at USD1.79 trillion, just below the highest level since October 2008.

“Hedge fund investors have been pouring money into funds,” says Sol Waksman (pictured), founder and President of BarclayHedge. “The industry hauled in USD75.0 billion in the first five months of 2011, which marks the heaviest such inflow since 2007.  Performance, however, has hardly been stellar.  The Barclay Hedge Fund Index shows a year-to-date return of just 2.1% through May, and many managers are in the red for the year.”

Hedge fund investors remain extremely interested in commodities.  Commodity trading advisors (CTAs) took in USD4.5 billion (1.4% of assets) in May, the sixth straight inflow as well as the fourteenth in 15 months.  CTAs have hauled in USD28.6 billion (9.0% of assets) in 2011. Meanwhile, funds of hedge funds took in USD3.8 billion (0.7% of assets) in May, the fourth straight inflow.

“The investors who have been banking on funds of funds and CTAs have not been rewarded,” says Minyi Chen, Vice President of Quantitative Research at TrimTabs.  “Funds of funds were up only about 1% through May, while CTAs were actually down about 1%.  We believe that heavy inflows alongside poor performance often signals that caution is in order.”

Multi-Strategy funds hauled in USD2.6 billion (1.2% of assets) in May, the fifth straight inflow and one of the heaviest inflows of all hedge fund strategies.  Meanwhile, hedge fund investors continue to flock to fixed income. Fixed Income hedge funds took in USD1.4 billion 0.8% of assets) in May, the fifth straight inflow.

“Fixed Income funds are on a remarkable run,” explains Chen. “These funds posted a positive return in 25 of the past 26 months, and they posted an inflow in 12 of the past 13 months. Additionally, bond mutual funds and ETFs, especially Treasury funds, are posting sizable inflows.  We are interested to see how investors behave — and how fixed income managers perform — now that the Fed is no longer buying Treasuries.”

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