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Sol Waksman, founder and President of BarclayHedge. 

Hedge funds pull in USD3.8bn in June

The hedge fund industry took in USD3.8 billion (0.2% of assets) in June, the sixth straight inflow as well as the eleventh in 12 months, according to the latest figures from BarclayHedge and TrimTabs Investment Research. 

Industry assets decreased to USD1.806 trillion from USD1.822 trillion in May because performance was poor. The Barclay Hedge Fund Index decreased 1.0% in June.

“Investors were very kind to hedge funds in the first half of the year,” says Sol Waksman (pictured), founder and President of BarclayHedge. “The industry raked in USD73.0 billion (4.0% of assets), which goes down as the heaviest first-half inflow since 2007. But we wonder if strong inflows will persist through the remainder of the year in light of the recent bloodbath in equities.”

Fixed Income hedge funds hauled in USD15.1 billion (7.9% of assets) in the first half of 2011, the second-heaviest inflow of all hedge fund strategies. These funds took in money in 13 of the past 14 months and returned 4.9% in the first half of the year, the second-best performance of all strategies.

“Fixed Income funds are on fire,” says Minyi Chen, Vice President of Quantitative Research at TrimTabs.  “Keep in mind that hedge fund managers, alongside most other segments of the market population, have been bearish on the long end of the curve all year.  Nevertheless, the yield on the 10-year Treasury has plunged to 2.36% from 3.75% in February.”

Multi-Strategy hedge funds raked in USD15.2 billion (7.2% of assets) in the first half of 2011, the heaviest inflow of all hedge fund strategies, even though they posted a mediocre return.  Similarly, Macro funds and Emerging Markets funds posted two of the heaviest inflows despite turning in the two worst performances of all hedge fund strategies.

“We see lopsidedness between performance and flows regularly in not only our hedge fund flow data but also our retail and institutional flow data,” notes Chen.  “These imbalances are predictive more often than not.  We believe investors should consider investment candidates that are performing well but not attracting heavy inflows.  Similarly, we fear any asset class into which investors keep flocking despite poor returns.”

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