Investors Dump $6B Into Hedge Funds As Managers Shy Away From Stocks

Oct 11 2011 | 12:11pm ET

Hedge fund returns keep falling, but hedge fund investors keep forking over billions of dollars to hedge fund managers, according to new data.

Investors added $6.1 billion to hedge funds in August—by some measures the worst month for the industry in almost three years—according to BarclayHedge and TrimTabs Investment Research. The inflow, the hedge fund industry's seventh in eight months, brings to $51 billion the total inflow to hedge funds this year.

"Recent inflows might owe in part to excellent relative performance,” Sol Waksman, BarclayHedge founder, said.  “While the S&P 500 plunged 10.6% in the four months ended August, the Barclay Hedge Fund Index decreased only 5.6%.  Additionally, our preliminary data for September reveals that hedge funds outperformed the S&P 500 by more than a 2:1 margin again last month.”

The only problem is that hedge funds may have trouble finding someplace to put all of that money. Hedge fund managers turned dramatically bearish on U.S. equities last month, with 57% having a negative view of the Standard & Poor's 500 Index, while bullish sentiments on long-term U.S. Treasuries jumped from 15% to 23%.

"Hedge fund managers have zero interest in risk at present,” TrimTabs' Leon Mirochnik said.  “They are clinging to the safety of Treasuries and the greenback and stiff-arming stocks.  Nevertheless, hedge fund investors are forking over fresh cash, and managers must put it to work.  This money could support equities in the final quarter of 2011, especially if hedge fund managers lever up in an attempt to end the year with a bang."


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...