Investors fled Europe-linked hedge funds in May: report

Date: Thursday, June 21, 2012
Author: Katya Wachtel, Reuters

Investors cut their exposure to hedge funds that invest in and are located in Europe during May as the euro zone financial crisis wrought havoc on global markets, data showed on Wednesday.

Investors last month withdrew about $9.3 billion from hedge funds located in Europe and pulled $9.1 billion from hedge funds that invest mostly in Europe, hedge fund tracking firm eVestment|HFN found.

"The higher rate of decline has been from those funds investing primarily in European markets and the reason is fairly straightforward; a lack of desire for exposure to European corporates, whether hedged or not, which are being impacted by the region's slowing growth and sovereign difficulties," said Peter Laurelli, vice president of research at eVestment|HFN.

Laurelli noted that the reasons for withdrawals from hedge fund managers based in the euro zone may be due, in some part, to investor concerns about the counterparty exposures those managers could have to Europe's troubled financial institutions.

Funds that focus on emerging markets also saw outflows last month, eVestment found. For the ninth consecutive month investor withdrawals outpaced allocations to those managers, with $1.1 billion in redemeptions in May.

"The persistence of the current slide of investor assets from emerging market funds is unlike any we have seen since tracking fund flows back to 2003 and is only eclipsed in magnitude (but not duration) by redemptions during 2008 and 2009," eVestment|HFN said in its report.

Despite performance losses of $28.3 billion in May, the hedge fund industry recorded net inflows last month of $9.5 billion. Hedge funds on average lost over 1 percent in May.

INFLOWS FOR CREDIT, MACRO, EQUITY FUNDS Investors sent money to credit and macro funds in May, and pulled capital from commodity and managed futures funds.

Credit-focused managers, which gained more than 4 percent last month, gained $9.5 billion in May.

Macro funds had inflows of $2.7 billion, and equity funds gained $1.9 billion. It is only the second time in 11 months that stock-focused funds saw inflows beat redemptions. Those funds rose 2.4 percent in May.