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Hedge funds post outflow of $2.9bn, or 0.2% of assets in July 2010, industry assets at lowest level since November 2009

Thursday, September 02, 2010
Opalesque Industry Update - TrimTabs Investment Research and BarclayHedge reported that the hedge fund industry posted an estimated outflow of $2.9 billion, or 0.2% of assets, in July 2010, the second straight outflow as well as the third in four months. Industry assets sank to $1.53 trillion, the third straight decrease and the lowest level since November 2009.

“Hedge funds posted a positive return in July, but they did not regain the ground they lost in May and June,” said Sol Waksman, CEO of BarclayHedge. “They also underperformed the S&P 500 by five percentage points.”

Commodity trading advisors (CTAs) posted a heavy inflow of $3.9 billion, or 1.7% of assets, in July, the fifth straight inflow as well as the twelfth in 14 months. CTAs boast a solid year-to-date return of 3.2%. Meanwhile, funds of hedge funds redeemed $670 million, or 0.1% of assets, in July.

“Funds of funds are in a bad way,” said Vincent Deluard, Executive Vice President at TrimTabs. “They posted only five inflows in the past 25 months, and assets sit at the lowest level since February 2005. Investors continue to abandon them because they have underperformed hedge funds by fourteen percentage points since March 2009.”

Hedge fund investors were risk averse in July. Emerging markets funds redeemed $1.9 billion, or 1.0% of assets, the third straight outflow. In contrast, fixed income funds posted an inflow of $1.2 billion, or 0.8% of assets, the fifth inflow in six months. Investors are chasing standout performance.

“Fixed income funds posted a negative return in only one of the past 19 months, and they are up 7.7% for the year—far and away the best return of any hedge fund strategy,” noted Deluard. “Little wonder that investors are drawn to them like moths to a flame.”

The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies. For further information, please visit Source

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