Hedge funds redeem USD4.9bn in June 2012

Based on data from 3,012 funds, the TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets were USD1.71trn in June, down 1.3 per cent from USD1.73trn in May and down 29.5 per cent from their peak of USD2.4trn set in June 2008.

“The hedge fund industry can’t seem to get out of the doldrums,” says Sol Waksman, founder and president of BarclayHedge. “Industry performance continues to lag popular benchmarks such as the S&P 500, and asset growth has been flat for most of the past year.”

Industry outflows totalled USD32.1bn from July 2011 to June 2012, compared with inflows of USD103bn for the previous 12 months, according to the report, while industry assets have hovered below USD1.75trn for the past nine months.

Hedge fund industry performance was up only 0.6 per cent in June, substantially less than the S&P 500 Index, which rose 3.96 per cent.

“The industry outperformed the S&P 500 in April and May, but June’s numbers returned to the trend we’ve seen all year,” Waksman says. “For the first six months of 2012, the industry earned a 2.4 per cent return while the S&P 500 rose 8.3 per cent.”

Meanwhile, funds of hedge funds continued to underperform the industry at large. In June, funds of funds redeemed USD8.7bn (1.7 per cent of assets), the 13th monthly outflow in the past 18 months, and posted a 0.5 per cent loss, lagging the industry’s returns by 110 basis points.

Among the major hedge fund categories, fixed income funds had the strongest inflows and the top performance over the past year.

“Fixed income funds were a haven, reliably turning profits and attracting inflows as one crisis after another whip-sawed financial markets around the globe,” says Charles Biderman, founder and chief executive of TrimTabs.

Out of 13 major hedge fund categories, no equity-related categories showed a profit in the past 12 months, and two of the four worst-performing categories were represented by stock funds, equity long bias (-6.1 per cent) and equity long only (-7.4 per cent).

Hedge funds based in the Eurozone experienced the largest inflows (3.0 per cent of assets) in June among eight global regions tracked by TrimTabs and BarclayHedge, a turnaround from the dominant trend of the past year.

Meanwhile, the July 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that fund managers were evenly divided between neutral and bearish on the S&P 500 for August. Conducted in late July, the survey of 78 hedge fund managers found that bullish sentiment on the S&P 500 dropped to an 11-month low while bearish sentiment jumped to its highest level in the past nine months.