Hedge funds take in USD2.3bn in March

Date: Friday, May 11, 2012
Author: Wendy Chothia, HedgeWeek

The hedge fund industry added USD2.3 billion (0.1% of assets) in March, down from a USD6.8 billion inflow in February and only the fourth monthly inflow since July 2011.

Based on data from 3,034 funds, the March TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets stood at USD1.8 trillion in March, up 2.2% from USD1.7 trillion in February.

In the first quarter of 2012, ended March 31, TrimTabs and BarclayHedge reported industry outflows amounted to USD3.2 billion.  In the same period, the industry managed a mere 5.61% gain, while the S&P 500 surged 12%.  “Hedge fund industry returns continued to lag popular financial industry benchmarks,” says Charles Biderman, founder and CEO of TrimTabs.

Asset growth in the hedge fund industry has been in a perpetual slide since July 2007, in contrast to its impressive year-over-year growth in assets after 2000, according to TrimTabs and BarclayHedge.  “Though asset growth rebounded in the summer of 2009, it petered out in May of 2010 and has been sliding ever since, even as equity market asset prices remained resilient and surged strongly in Q1 2012,” says Sol Waksman Ipictured), founder and president of BarclayHedge. 

Two hedge fund investment strategies are attracting more investors, according to the TrimTabs and BarclayHedge report. 

“Macro and Fixed Income hedge funds are the only strategies that have seen sizeable inflows as a percentage of assets over the past three years,” said Leon Mirochnik, an analyst at TrimTabs. “Hedge fund investors see these strategies as offering the best defence against unpredictable geopolitical issues and global expansionary monetary policies.”

Hedge funds based in Japan have been very popular in the past year, generating an inflow of 15.4% of assets despite losing 4.3%. “Apparently investors were betting they could capitalise on an appreciating yen over the past 12 months, but the yen lost 0.9% against the US dollar in that time period,” Mirochnik says.

Meanwhile, the April 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that nearly half the hedge fund managers surveyed believe that sometime this year the S&P 500 will trade below 1257, where the index stood at the end of 2011.  A plurality, 31.3%, of the 68 managers surveyed in the third week of April think the S&P 500 will not fall below 1257 this year.

The managers surveyed did not show a strong conviction about the S&P 500 performance this month.  Opinions were 33.8% bullish, 35.3% neutral, and 30.9% bearish. Bearishness inched upward to a five-month high, the markedly neutral tone of March faded in April, and a small rise in bullishness this month still remained far below the levels of December 2011 through February 2012, the survey found.

While sentiment on the US Dollar Index saw only minor changes, hedge fund managers’ outlook on 10-Year Treasuries saw dramatic shifts in April: Bearishness shrank to 18.5% from 48.4% in March, neutral sentiment jumped to 63.1% from 38.7%, and bullishness rose to 18.5% from 12.9%, the survey found.