The hedge fund industry redeemed USD7.4bn (0.4 per cent of assets) in July, building on outflows of USD4.2bn in June, according to BarclayHedge and TrimTabs Investment Research.
Based on data from 3,119 funds, theTrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets were USD1.87trn in July, down 23.2 per cent from their June 2008 peak of USD2.4trn.
“We’ve seen a notable reversal in hedge fund industry fortunes during the past year,” says Sol Waksman, founder and president of BarclayHedge. “The industry experienced outflows in seven of the 12 months from August 2011 to July 2012, losing a net USD29.3bn. From August 2010 to July 2011, the industry gained USD96.2bn with inflows in 10 out of 12 months.”
Echoing a theme that has persisted throughout 2012, the hedge fund industry in July underperformed the benchmark S&P 500, gaining only 0.75 per cent, while the S&P 500 rose 1.26 per cent. For the first seven months of 2012, the industry earned a 3.1 per cent return while the S&P 500 rose 9.7 per cent.
TrimTabs and BarclayHedge track 13 major hedge fund categories representing strategies such as fixed income, merger arbitrage, and equity market investments. Macro funds, which exploit shifts in macroeconomic trends around the globe, gained 1.5 per cent in July — the only category to outperform the S&P 500 for the month.
“The performance of these individual hedge fund categories underscores the frustrations of hedge fund investors over the past few years,” says Charles Biderman, founder and chief executive of TrimTabs. “Fixed income funds are a prime example. They were one of the top categories for the past year, but they slid down into the middle of the pack in July with net outflows of USD188m and a 0.8 per cent return.”
Among the eight global regions tracked in the report, hedge funds based in Continental Europe had the highest returns in July at 1.3 per cent. Nevertheless, they experienced outflows worth 3.3 per cent of assets.
“We are seeing a substantial disconnect between performance and flows among the regional fund categories,” says Minyi Chen, vice president at TrimTabs. “For the past 12 months, Continental Europe funds performed best at 0.2 per cent, but they had the biggest outflows at -23.5 per cent of assets.”
Meanwhile, the August 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 September. Conducted in late August, the survey of 63 hedge fund managers also found that they had become significantly more bearish on 10-year Treasury notes, while bullish sentiment on the US dollar plunged to a 12-month low.
