Demand for hedge funds crept upwards in May, according to the Barclay Fund Flow Indicator, as equity markets rebounded and the US economy improved. Industry assets remained at an all-time high of USD3.0 trillion.
Data drawn from more than 5,000 hedge funds in the BarclayHedge database estimated that the hedge fund industry (excluding CTAs) took in USD4.0 billion (0.1 per cent of assets) in May, reversing USD1.9 billion in redemptions the month before. Industry assets climbed 3.5 per cent year-to-date and surged 17.6 per cent over the trailing 12 months, according to the Barclay Fund Flow Indicator, a monthly big-picture report on the health of the alternative investments industry.
“For all the stress over trade and volatility in May, hedge fund investors noted that US economic fundamentals improved amid strengthening says earnings, low inflation pressures, and the prospect of mild upticks in interest rates,” said Sol Waksman, founder and president of BarclayHedge.
Fixed Income hedge funds enjoyed the heaviest total inflows in the trailing 12 months ending in May, adding USD28.6 billion (6.0 per cent of assets). Equity Market Neutral funds saw the heaviest 12-month demand when measured by percentage of assets (USD13.4 billion, 18.3 per cent of assets).
At the regional level, hedge funds focusing on the US and Offshore Islands fared best in May, taking USD7.4 billion (0.5 per cent of assets) and reversing two months of redemptions. Funds focusing on Continental Europe suffered the highest May outflows at USD10.4 billion (-1.4 per cent of assets). “Hedge fund investors are weighing the risk of a rising populist tide in Italy and across the continent,” Waksman says.
“Demand for hedge funds focusing on the UK and Offshore Islands slowed to a trickle. These funds bear watching,” Waksman noted. “They added a slim USD650 million (0.1 per cent of assets) in May, a sharp slowdown from the trend of the past 12 months, when they had the strongest regional flows.”
In the managed futures sector, commodity trading adviser (CTA) funds added USD530 million (0.1 per cent of assets) in May, a turnabout from outflows of USD1.3 billion (-0.4 per cent of assets) the month before. CTAs have endured tepid demand since March, a notable reversal from January-February, when they raked in a combined USD15.4 billion (4.2 per cent of assets).
“The fall-off in demand since February could be a sign that investors suspect oil prices have risen too far too fast,” Waksman says.
