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“The small inflows of May did not really buck the larger hedge fund industry trend of meager returns, flat asset growth, and net outflows over the past year,” said Sol Waksman, founder and president of BarclayHedge. Outflows from the industry totaled $18.8 billion from June 2011 to May 2012, compared to inflows of $96.2 billion for the previous 12 months while assets hovered around $1.7 trillion for the past nine months.
For the second month in a row, the hedge fund industry outperformed the benchmark S&P 500, but it still remained on the loss side. While the S&P Index fell 6.27% in May, the hedge fund industry had losses of 3.05%. For the first five months of 2012, however, the industry underperformed with a 1.8% return vs. a 4.2% gain for the S&P 500.
Waksman noted, “Hedge funds have underperformed the S&P500 on a trailing three-year basis for the past seven months, so the next several months will be telling in terms of whether the industry can get back to delivering sizable returns to its customers.”
Among the major hedge fund categories, Fixed Income funds have had the highest inflows and the best returns over the past year. “Fixed Income is in demand because low interest rates and easy monetary policies from central bankers have driven yields to record lows,” said Charles Biderman, founder and CEO of TrimTabs, who noted that Multi Strategy and Macro funds are also attracting investors because they can capitalize on political and financial turmoil like the Eurozone sovereign debt crisis.
Reflecting the debt crisis that has pummeled Greece and Spain, hedge funds based in Continental Europe lost 7.0% of assets in May and 25.5% of assets from June 2011 to May 2012. “We believe investors are looking to minimize their exposure to Europe and European financing while reallocating their assets to geographical regions they believe will benefit from a more stable financial system and currency,” said Leon Mirochnik, vice president at TrimTabs. Japan-based hedge funds were investor favorites, taking in the largest inflows among global regions for the past year (20.1% of assets) even as they generated some of the worst returns (-8.2%).
Meanwhile, the latest June 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that 26.5% of managers were bullish on the S&P 500 for July, while 33.7% were bearish and 38.9% were neutral. Conducted in late June, the survey of 99 hedge fund managers found bullishness in terms of the S&P 500 at a 10-month low, while neutral sentiment climbed to just short of a 12-month high.
The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies. Click here for further information.
BarclayHedge is a leading hedge fund data vendor and one of the foremost sources for proprietary research in the field of alternative investments. From its origin as a research specialist and performance measurement firm, BarclayHedge has developed complete client services as a publisher, database and software provider, and industry consultant.
TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity--including mutual fund flows and exchange-traded fund flows--as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit us here.
