Hedge funds feel the January blues as subscriptions slip

Date: Thursday, January 12, 2012
Author: Anjuli Davies, Reuters

* Hedge fund exits rise in January

* Net subscriptions drop 0.88 points

* Investors rebalance portfolios for new year

London, Jan 11 (Reuters) - Hedge funds have started the new year with a bout of the January blues, as investors get their books in order to start afresh in 2012, after last year's rollercoaster ride, data showed on Wednesday.

The GlobeOp Capital Movement Index, which tracks monthly net subscriptions to and redemptions from hedge funds managing around $170 billion of assets, declined 0.88 points to 140.18 this month.

GlobeOp Chief Executive Hans Hufschmid attributed the decline to typical changes in investor strategy at the start of a new year and said historically the figures were encouraging.

"In line with year-end portfolio rebalancing, January net capital flows were negative," said Hufschmid. "The net figures were therefore not unexpected. Interestingly, January's inflows were the highest in 12 months; outflows were the second lowest in seven years."

Hedge funds saw an exit of money in the month to Jan 1, with gross outflows rising to 4.84 percent, more than double the 1.92 percent rise a month earlier.

Gross inflows of money remained relatively robust, however, rising 3.96 percent, higher than the 3.52 percent a month earlier.

The index is clinging on above the 140-point mark it hit in December for the first time since October 2008, when Lehman's demise sent markets across the world into a tailspin.

The $1.7 trillion hedge fund industry had a humbling year in 2011, with the average fund dropping 4.8 percent and some stock-focused funds suffering an average 19 percent decline, according to research compiled by Hedge Fund Research and Bank of America Merrill Lynch analysts.

It was only the third calendar year since HFR began measuring industry-wide performance in 1990 that hedge funds finished in the red.

Even though the fourth quarter of 2011 saw hedge funds gain 1.3 percent, that small boost barely helped firms whipsawed by record volatility in the third quarter as the European sovereign debt crisis sent markets into freefall, and the U.S economy stagnated.