The hedge fund industry took in a lacklustre USD852m (0.05 per cent of assets) in May, but that was an improvement over April’s net outflows of USD3.2bn, according to data from BarclayHedge and TrimTabs Investment Research.
Based on data from 3,001 funds, the May TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that the hedge fund industry assets stood at USD1.72trn in May, down 2.0 per cent from USD1.76trn in April and down 29 per cent from the peak of USD2.4trn set in June 2008.
“The small inflows of May did not really buck the larger hedge fund industry trend of meager returns, flat asset growth, and net outflows over the past year,” says Sol Waksman, founder and president of BarclayHedge.
Outflows from the industry totalled USD18.8bn from June 2011 to May 2012, compared to inflows of USD96.2bn for the previous 12 months while assets hovered around USD1.7trn for the past nine months.
For the second month in a row, the hedge fund industry outperformed the benchmark S&P 500, but it still remained on the loss side. While the S&P Index fell 6.27 per cent in May, the hedge fund industry had losses of 3.05 per cent. For the first five months of 2012, however, the industry underperformed with a 1.8 per cent return versus a 4.2 per cent gain for the S&P 500.
Waksman says: “Hedge funds have underperformed the S&P500 on a trailing three-year basis for the past seven months, so the next several months will be telling in terms of whether the industry can get back to delivering sizable returns to its customers.”
Among the major hedge fund categories, fixed income funds have had the highest inflows and the best returns over the past year.
Hedge funds based in Continental Europe lost 7.0 per cent of assets in May and 25.5 per cent of assets from June 2011 to May 2012.
“We believe investors are looking to minimise their exposure to Europe and European financing while reallocating their assets to geographical regions they believe will benefit from a more stable financial system and currency,” says Leon Mirochnik, vice president at TrimTabs.
Japan-based hedge funds were investor favourites, taking in the largest inflows among global regions for the past year (20.1 per cent of assets) even as they generated some of the worst returns (-8.2 per cent). Meanwhile, the latest June 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that 26.5 per cent of managers were bullish on the S&P 500 for July, while 33.7 per cent were bearish and 38.9 per cent were neutral.
Conducted in late June, the survey of 99 hedge fund managers found bullishness in terms of the S&P 500 at a 10-month low, while neutral sentiment climbed to just short of a 12-month high. The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis.
