Total hedge fund assets increased 0.35 per cent in July 2015, bringing the industry’s total assets under management to USD3.133 trillion, according to eVestment’s latest Hedge Fund Asset Flows report.
Investors withdrew an estimated USD5.0 billion from the industry in July, while performance increased AUM by an estimated USD16.1 billion.
With July’s USD5.0 billion outflow, investors have added an estimated USD64.3 billion into hedge funds in 2015 through July. This compares to USD102.1 billion through July of 2014, however investors redeemed nearly USD14 billion in the final five months last year.
Redemptions from event driven strategies in July weighed heavily on the month’s overall industry flow figures. The biggest redemptions in July have come from funds that began the year with large losses. The average decline in January from funds with the biggest redemptions in July was over -4.2 per cent. Losses from this group were evident in both June and July, making it somewhat unclear if redemptions are a near-term, or slightly longer-term factor of periods of elevated losses.
Macro funds saw elevated levels of investor interest in July. Inflows to the universe were highest since January 2010. Compared to the average H1 2015 gains of the aforementioned event driven strategies who lost assets in July of 1.6 per cent, the macro funds gaining the lion’s share of new assets in July returned and average of 5.5 per cent in H1 2015.
Managed futures funds, whose performance rebounded significantly from losses in May and June, had slight inflows in July of USD350 million. The allocations were below the average levels of the past seven months, however flows have been consistently positive over that span. This current streak of monthly inflows is the longest for managed futures funds since early 2010.
It is likely current redemptions from credit hedge funds, USD4.8 billion redeemed in July, are a result of the six month span of performance losses from August 2014 to January 2015. In the months immediately after that period, it was surprising to see flows remained positive, however the redemption cycle for credit strategies is typically longer than for more liquid, or perhaps less levered strategies.
Investor flows for commodity strategies were positive for a second consecutive month in July. Consistent investor interest in commodity exposure has been a rarity over the past several years. Multiple monthly inflows have occurred only two times since early 2012, in May/June 2014 and December/January 2014/15.
Multi-strategy flows continued their positive streak in July, albeit at their lowest positive level since the monthly string of nearly uninterrupted inflows began two years ago. Investors have added an estimated USD39.9 billion into the strategy in 2015 making it by far the most popular universe in the hedge fund industry ahead of macro and managed futures strategies.
Recent allocation/redemption trends being so similar to late-2009 gives a sense that investors are very concerned with global equity and credit markets. While the expectation may be that hedge funds provide relief from those markets’ downturns compared to traditional long-only strategies, recent flow trend suggest investors have at best been taking a wait-and-see attitude.
