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Alternative Market Briefing

Hedge fund investors opt for credit strategies, redemptions continue in July

Wednesday, August 22, 2012

Bailey McCann, Opalesque New York: Hedge fund assets increased 2.1% in July to $2.53tn , but investor redemptions persisted for the fourth month in the last five, accounting for outflows of $9.2bn, according to new data from eVestment. Traditional institutional account inflows were light in Q2 and investors favored credit strategies across both universes. The data shows clearly that investor confidence in equity strategies has hit a new low.

The report notes, "directional equity focused hedge funds continued to be a primary source of the industry’s redemptions in July as $4.4bn exited. This marks the fifth consecutive month, twelfth in the last thirteen, that equity hedge funds have recorded outflows. The trend is similar on the traditional institutional account side where investors redeemed a net $52.4bn from equity strategies in Q2 following light Q1 inflows."

Investors are also exiting European focused strategies and global macro strategies which have largely underperformed in 2012. On the traditional side, global tactical institutional accounts had well above average rate of net inflows in Q2. Investors are instead flocking to credit which saw an estimated $12.8bn in July inflows and $33.5bn in 2012.

Although not all credit strategies are seeing interest, the report highlights some nuance in terms of where investors are allocating - "while there have been large redemptions from institutional accounts with dedicated European credit exposure, hedge funds targ......................

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