Alt Investments
Investors Dipped Toes Back Into Hedge Fund Waters In May - Data
The global hedge fund industry logged a relatively meagre $852 million of inflows – equal to just 0.05 per cent of all assets – in May, but this did represent an improvement form $3.2 billion of net outflows in the previous month.
Hedge fund assets stood at $1.72 trillion in May, a fall of 2.0 per cent from April’s level, according to BarclayHedge and TrimTabs Investment Research, basing its figures on 3,001 funds. In June 2008, fund assets hit a peak of $2.4 trillion.
“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 totalled $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 Index of US stocks, but it still remained on the loss side. While the index fell 6.27 per cent in May, the hedge fund industry had losses of 3.05 per cent. For the first five months of 2012, however, the industry underperformed with a 1.8 per cent return versus a 4.2 per cent gain for the S&P 500.
“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 sizeable returns to its customers,” Waksman said.
Among the major hedge fund categories, fixed-income funds have had the highest inflows and the best returns over the past year.
Reflecting the debt crisis in the eurozone, hedge funds based in continental Europe lost 7.0 per cent of assets in May and 25.5 per cent of assets from June 2011 to May 2012.
“We believe investors are looking to minimise 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 favourites, taking in the largest inflows among global regions for the past year (20.1 per cent of assets) even as they generated some of the worst returns (-8.2 per cent).