Hedge Fund Assets Rise for First Time in 11 Months

Date: Wednesday, June 17, 2009
Author: Tomoko Yamazaki, Bloomberg

Hedge fund assets rose by $30.3 billion to $1.32 trillion in May, the first increase in 11 months, as the industry outperforms the global stock market rally, Eurekahedge Pte said.

The industry had net inflows of $11.3 billion last month while performance-related gains amounted to $19 billion based on preliminary figures, the Singapore industry researcher said in a report on its Web site. The firm released a preliminary report last week on the May performance.

“Investors who missed out on the rally may be encouraged to put money back into hedge funds,” said Winston Barnes, senior sales trader at WJB Capital Group Inc. in San Francisco. “When you have an up month, it’s human nature to buy and that helps hedge funds, but I’m still suspect if they will be able to weather another downside in the market.”

Hedge-fund managers are outperforming global benchmarks after posting the worst year on record in 2008, helping attract capital from investors. The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, gained 5.3 percent in May, its best performance since February 2000.

The index is up 9.4 percent this year to May, compared with a 4.2 percent advance for MSCI World Index of shares in 23 developed nations in the period.

Funds overseeing less than $100 million returned 5.8 percent, contributing the most to the gain in assets as well as performance, Eurekahedge said. That compared with a 3.2 percent advance by funds with more than $500 million under management.

Latin America

Assets of funds investing in Latin America rose 4.7 percent in May from April to $42.8 billion, the biggest percentage increase among five geographical mandates, as commodity prices rose, the report showed. Manager allocations to Asia ex-Japan had the smallest increase in assets, as it was the only regional mandate with net redemptions during the month, it said.

The majority of withdrawals from Asia ex-Japan were from managers employing so-called macro and distressed debt strategies, some of which had suspended withdrawals since the fourth quarter in 2008, the report said. Macro-fund managers wager on trends in stocks, bonds and currencies worldwide.

By strategy, managers of so-called long-short funds, who bet on rising and falling stock prices, had the largest increase in capital, gaining 3.6 percent with net inflows of more than $4.5 billion, Eurekahedge said.

Commodities

Managers who trade futures, known as commodity trading advisers or CTAs, had “strong returns and inflows” as commodities rallied, the report said. The Reuters Jefferies CRB Index, a benchmark for raw materials, jumped 14 percent in May.

“Fresh allocations have shown an increasing trend relative to redemptions, from investors aiming to benefit from the upside potential and the simultaneous capital protection that hedge funds offer comparative to more risky asset classes, such as mutual funds and direct equity investment,” Eurekahedge said in the statement.

Eurekahedge’s global index slid 12 percent last year, the most since the firm began tracking data in 2000. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net