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“Flows are doubtless following performance,” says Sol Waksman, founder and President of BarclayHedge. “The Barclay Hedge Fund Index posted a positive return in each of the eight months ended April, and investors of all stripes are prone to chase a winning streak.”

Multi Strategy funds hauled in $5.3 billion (2.5% of assets) in April, the heaviest inflow of all hedge fund strategies. Macro funds received $3.0 billion (2.6% of assets), the fourth straight inflow, even though these funds have posted a relatively poor return in 2011. Fixed Income funds took in $1.3 billion (0.7% of assets), the eleventh inflow in 12 months.

“The appetite for bonds appears to be insatiable,” notes Vincent Deluard, Executive Vice President at TrimTabs. “Hedge fund investors, ETF investors, mutual fund investors, and speculative traders are piling into the space. This enthusiasm explains why the yield on the 10-year Treasury has plunged to a six-month low.”

The TrimTabs/BarclayHedge Survey of Hedge Fund Managers for May 2011 reveals that managers have turned neutral on U.S. equities. About 30% of managers are bullish on the S&P 500, up from 23% in April, while 29% are bearish, down from 34%. Meanwhile, managers have turned marginally bullish on the U.S. dollar, and 34% plain to increase leverage in the near term.

“This desire to lever up squares with other data, including a level of margin debt that stands at the highest level since February 2008, that highlights a healthier appetite for risk,” notes Deluard. “Also, hedge fund managers have been decreasing exposure to defensive sectors such as Health Care and allocating more cash to cyclical sectors. Basic Materials accounted for a huge 18.9% of hedge fund equity assets at the close of the first quarter, which is twice as large as its share of the Russell 3000.”

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.

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