The hedge fund industry took in USD5.1bn (0.3 per cent of assets) in August, reversing a USD9.2bn outflow (0.5 per cent of assets) in July, according to BarclayHedge and TrimTabs Investment Research.
Based on data from 2,999 funds, the TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets stood at USD1.7trn in August, down 28.7 per cent from their June 2008 peak of USD2.4trn.
“The inflows we saw in August could not mask the profound troubles facing the hedge fund industry this year,” says Sol Waksman, founder and president of BarclayHedge. “While the industry had inflows in four of the first eight months of 2012, much stronger outflows in the other four months yielded net redemptions of USD13.2bn (2.0 per cent of assets) year to date.”
In addition to losing assets this year, the hedge fund industry continued to underperform the benchmark S&P 500, gaining 1.05 per cent in August while the S&P 500 rose 1.98 per cent. For the first eight months of 2012, the industry earned a 4.2 per cent return while the S&P 500 rose 10.1 per cent.
Of the 13 major hedge fund categories that TrimTabs and BarclayHedge track, fixed income funds attracted the most assets in all three time horizons measured in the report: monthly, year-to-date, and over the past 12 months. Fixed income funds also had the best 12-month returns at 7.1 per cent and the second-best y-t-d returns at 6.2 per cent (convertible arbitrage funds came in first at 6.8 per cent).
“Fixed income funds significantly bested the hedge fund industry average of 1.3 per cent for the past 12 months,” says Charles Biderman, founder and chief executive of TrimTabs. “We cannot help noting that while the S&P 500 rose 15.4 per cent from September 2011 to August 2012, the best stock-based hedge fund strategy, equity long bias, produced a meagre 2.0 per cent return. As an industry, hedge funds seem to have lost their touch in the stock market.”
Among the eight global regions tracked in the report, hedge funds based in Canada had the highest returns in August at 2.9 per cent, while funds based in Japan performed worst at 0.2 per cent. Also in August, funds based in Continental Europe had the largest inflows at 0.6 per cent of assets while China/Hong Kong funds and Japan-based funds had the largest outflows at 0.6 per cent of assets for each category.
“It appears investors were unloading Asia funds and investing them in hope of tapping a rebound in euro-denominated securities, which took a strong beating in the debt-crisis sell-off earlier this year,” said Leon Mirochnik, vice president at TrimTabs.
Meanwhile, the September 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that sentiment was evenly divided between neutral and bullish on the performance of the S&P 500 for October. Conducted in late September, the survey of 81 hedge fund managers also found that a majority expect Barack Obama to be re-elected and an even stronger majority expect control of Congress to remain divided.