Hedge Fund Redemptions, Assets Up In Feb

Mar 5 2012 | 10:41am ET

Investors pulled $15.2 billion from hedge funds in January 2012, as overall industry assets climbed to $1.70 trillion from $1.68 trillion at end-2011.

According to BarclayHedge and TrimTabs Investment Research, hedge funds underperformed the S&P 500 by 110 basis points for the month.

“Hedge funds managed a 3.1% return in January after posting losses in seven out of the last eight months of 2011,” said Sol Waksman, founder and president of BarclayHedge. The benchmark S&P 500 Index returned 4.2% in January after outperforming the hedge fund industry for all of 2011.

“January marked the biggest monthly outflow since July 2009, when hedge funds redeemed $17.7 billion,” said Leon Mirochnik, an analyst at TrimTabs. “The hedge fund industry has experienced net outflows in four out of the last five months.”

Fixed income, multi-strategy, and merger arbitrage hedge funds are the only strategies to have seen net inflows since September 2011. Multi-strategy funds led, pulling in $2.6 billion in January. Mirochnik says investors seem to be “piling into strategies that can benefit from geopolitical  uncertainty around the world.”

Funds of hedge funds underperformed their hedge fund counterparts by 140 bps, returning 1.7% in January and Mirochnik thinks FoF managers might have difficulty explaining “their layers of fees” to clients given that funds of funds have underperformed hedge funds by 200 bps over the past year.

In related news, hedge fund managers polled by TrimTabs/BarclayHedge remain bullish on U.S. securities, although the sentiment was less marked in February 2012 than in the previous month. Of the 105 hedge fund managers surveyed in the third week of February 2012, 40% were bullish on the S&P 500, compared to 45.4% in January. Bearish sentiment rose to 30.5% in February from 25.0% in January.

Nearly 30.0% of managers believe that U.S. equities will be the top-performing investment over the next three months. Gold came in second at nearly 23.0% followed by oil with 20.0%.


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