Investors have allocated nearly USD26bn to securitised credit strategies since the financial crisis, including USD3.9bn in 2013, according to an eVestment report on hedge fund investment in securitised credit markets.
The universe, which includes ABS, MBS, and CDOs, has produced average annual returns in excess of 25 per cent making it one of the greatest runs for both investors and managers the hedge fund industry has produced in its history.
In the 56 month span beginning January 2009, investor flows into the universe was positive nearly 70 per cent of the time. In the last nine months flows have been positive in only four. While overall flows in this nine month span have been positive, it is important to recognise the presence of some negative investor sentiment towards the group.
Investor interest in the US mortgage fixed income universe peaked in Q2 2012, but have since declined each quarter, ultimately turning negative in Q1 2013 with outflows accelerating into Q2.
Some USD12bn has been removed from the traditional US mortgage fixed income universe in 2013, driven by redemptions from US-based sub-advised accounts. The only reason flows are not significantly worse is due to new allocations from accounts based in continental Asia and Africa/Middle East.