Hedge funds still pulling in billions
HEDGE funds pulled in $9.5bn (£6.22bn) during the second quarter with nervous investors preferring to send their money to the biggest and best established managers, according to industry tracker Hedge Fund Research Inc.
Hedge fund managers have seen flat returns on average as they have battled a volatile market so far this year, but that hasn’t stopped wealthy investors from sinking more cash into the industry. Strategies like global macro and event-driven funds that may insulate investors from stock market swings, have been seen as particularly attractive.
The fund industry’s most established firms with more than $5bn in assets under management, saw $8.8bn of the total inflows in the second quarter, according to HFRI.
“The hedge fund industry continues to be dominated by investor preference for robust fund infrastructure, encompassing enhanced liquidity and transparency,” Ken Heinz, president of HFRI, said in a statement.
Overall, hedge fund performance declined by about 0.2 per cent in the first half of 2010, according to HFRI. While the performance may seem shabby compared to blockbuster 2009 returns, hedge funds have shown that they are getting better at holding onto investor capital.
“Compared to at least the equity markets, they’ve fared pretty well,” said Oliver Schupp, president of alternative investment specialist Credit Suisse Index Co Inc. The benchmark Standard & Poor’s 500 index .SPX was off 7.9 per cent for the year to 30 June, though has bounced back some in the last few weeks.
Global macro, event-driven and fixed income arbitrage funds have been the best performing funds so far this year and also attracted the most new capital, according to data on Tuesday from Credit Suisse.
Global Macro funds which are up 4.2 per cent on average so far this year, have attracted some $9.1bn in inflows in 2010, boosted mostly by an $8.bn surge in the first quarter, according to Credit Suisse.
Fixed income funds and event-driven funds have each attracted about $2bn of fresh inflows this year, according to Credit Suisse.
Through the second quarter, fixed income fund returns are up 5.5 per cent on average, while event-driven funds are up 1.8 per cent on average, Credit Suisse said.
By contrast, emerging market funds, long-short equity funds and multi-strategy funds saw the biggest outflows in the second quarter, Credit Suisse said. Multi-strategy funds have been the bigest losers of the year, seeing some $8.9 billion in outflows.
“The significant outflows in multi-strategy could have to do with investors desire to have more clarity about their strategy,” Schupp said.
Total flows into the industry are still relatively flat. Hedge fund asset flows for the first half declined by $1.4bn overall, according to Credit Suisse, suggesting investors are mostly staying put after an $81.8bn outflow in the first half of 2009.
The entire hedge fund industry was managing some $1.65 trillion in capital at the end of the second quarter, down from $1.67 trillion in the first quarter, HFRI said noting that the largest firms now manage 60 per cent of all hedge fund industry capital.