Hedge funds redeemed an estimated USD15.2 billion (0.9% of assets) in January 2012 – the highest outflow since July 2009 – while underperforming the S&P 500 by 110 basis points for the month, according to research by BarclayHedge and TrimTabs Investment Research.

Industry assets rose to USD1.70 trillion in January from USD1.68 trillion in December 2011.

“Hedge funds managed a 3.1% return in January after posting losses in seven out of the last eight months of 2011,” says Sol Waksman (pictured), founder and President of BarclayHedge. The benchmark S&P 500 Index returned 4.2% in January after outperforming the hedge fund industry for all of 2011.

“January marked the biggest monthly outflow since July 2009, when hedge funds redeemed USD17.7 billion,” says Leon Mirochnik, an analyst at TrimTabs. “The hedge fund industry has experienced net outflows in four out of the last five months.”  Fixed Income, Multi-Strategy, and Merger Arbitrage hedge funds are the only investing strategies that have seen net inflows since September 2011.

Funds of hedge funds underperformed their hedge fund counterparts by 140 bps, returning 1.7% in January.

“It seems funds-of-funds managers might have a hard time explaining their layers of fees to their clients, as funds-of-funds have underperformed hedge funds by 200 bps over the past year,” Mirochnik says. “Multi-Strategy hedge funds pulled in USD2.6 billion (1.1% of assets) in January, the heaviest inflow of the strategies we track. Investors seem to be piling into strategies that can benefit from geopolitical uncertainty around the world.”

Meanwhile, the latest TrimTabs/BarclayHedge Survey of Hedge Fund Managers reveals hedge fund managers remain bullish on the prospects of US equities. The survey of 105 hedge fund managers found bullish sentiment on the S&P 500 at 40.0% in February 2012, down from 45.4% in January. Bearish sentiment rose to 30.5% in February from 25.0% in January. Managers were surveyed in the third week of February.

The survey also found that nearly 30.0% of managers believed that U.S. equities would be the top-performing investment over the next three months. Gold came in second at nearly 23.0% and oil received 20.0% of the vote.