Wed, Jun 1, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Slowdown in U.S. and declining commodity prices drag on hedge funds in May

Thursday, June 23, 2011
Opalesque Industry Update - The sharp turnaround of the U.S. dollar in May and the decline in commodity prices were a drag on hedge fund performance during the month as the industry’s assets fell 0.79% to $2.586tln on weak performance, according to hedge fund data tracker HedgeFund.net.

As of June 21, 2011 and with 3,255 hedge fund products reporting, the HFN Hedge Fund Aggregate Index was down -1.06% in May (+1.62% YTD) compared to the S&P 500 Total Return Index (S&P) which also fell -1.13% during the period (+7.82% YTD).

Weak performance was the biggest pull down last month, eating up the increase in net investor allocations. May’s negative results also ended the hedge funds’ 10-month winning streak up to April.

HFN Vice President Peter Laurelli commented that despite the aggregate equity market slide, “there were pockets of strong returns for hedge funds in the healthcare sector as well as positive performance, albeit slight, for small/micro cap related strategies. Mortgage funds continued to produce positive returns and along with healthcare funds are the only strategy/sector groups to have outperformed the S&P in 2011.”

More importantly Laurelli noted that many strategies that pushed performance to a positive levels in April, reversed their outputs last month, with the biggest losses reported in CTA/managed futures strategies along with energy and technology equity focused funds.

However, credit strategies showed resilience from May’s volatile market and outperformed other strategies, particularly mortgage funds. Some emerging markets interest rate markets and short European sovereign debt also provided positive results.

In Asia, Japan-focused funds have yet to recover from the devastations brought by the earthquake and tsunami in March as they recorded negative results for the third straight month. Japan-focused hedge funds fell an average 5% since March.

Monthly asset flow estimates

  • Total estimated hedge fund assets at the end of May 2011 were $2.586tln, a decrease of 0.79%, or $20.5bnfrom April.
  • Performance accounted for a decrease of $31.9 billion and investors accounted for a net inflow of $11.4bn.

  • The core rate of growth (% asset change due to investor allocations/redemptions) was 0.44%, a decrease from April and only slightly above the prior twelve month average.

  • Total hedge fund AUM is now 14% below the all-time high set in Q2 2008.

Regional performance
Regional performance also suffered a hit as emerging markets equities related returns took a dive with the biggest losses coming from Russia and India focused strategies. The HFN Emerging Markets Index is barely positive for the year at +0.12%, its lowest level through the first five months of a year since 2008 and second lowest since the Russian financial crisis of 1998.

Australia focused hedge funds recorded the highest losses among any developed markets as it declined -2.28% during May.

Laurelli added: “While money flows into hedge funds have continued at an above average pace, the influx of capital may be a vote of lack of confidence in direct investment in traditional markets. The vast majority of equity markets are in negative territory in June, the Greek debt crisis has European credit markets sitting at a point of flux and commodity prices are mixed with energy prices continuing their fall. All of which points to another difficult month for aggregate hedge fund returns, however it may be a second straight month when the industry outperforms broad equity markets.”

Eurekahedge Hedge Fund Index fell -1.24%
In its latest industry update, Eurekahege reported that Eurekahedge Hedge Fund Index fell -1.24% in May as industry assets lost $5bn during the period.

The report added that while investor allocations outpaced redemptions by $8bn, performance has wavered and has dragged the industry down.

A separate report also blames the poor U.S. economic data and the renewed fears that China is headed towards a slow down for the poor performance of the hedge fund industry last month.

A survey by Man Group has found that managed futures and global macro funds was hardest hit on concerns on the U.S. dollar and long commodity positions which weighed heavily on performance.
Komfie Manalo

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Scientist turned hedge fund founder cuts profitable Aussie short, Pelargos joins hedge funds’ bet on turnaround at Honda, Managers set to cash in on infrastructure debt upswing[more]

    Scientist turned hedge fund founder cuts profitable Aussie short From Bloomberg.com: AE Capital, a hedge fund run by a former atmospheric scientist, trimmed bets against the Australian dollar as it gauges shifts in the world’s two biggest economies. The Australian, Canadian and New Zeala

  2. He's lost £200m in a year - so has Britain's star hedge fund boss Crispin Odey lost his golden touch?[more]

    From Thisismoney.co.uk: ...Odey’s laid-back attitude gave no indication of the turmoil his flagship fund had put investors through. It had tumbled 20 per cent in May – a terrible performance given most of his rivals were in positive territory for the year. Odey’s fund had got into trouble after taki

  3. Comment - If you’re such a great investor, where’s your alpha?[more]

    From Mineweb.com: … They are few and far between. You likely know their names. There is a short list of those who have 1) outperformed; 2) over long periods of time, and; 3) manage substantial sums of money. It’s impressive if you are on that list, but discouraging if you seek to invest institutiona

  4. European fund managers 'dressing up’ track record to gloss on performance[more]

    Komfie Manalo, Opalesque Asia: A new study by global analytics firm Cerulli Associates has found that the problem of 'dressing up' track records by fund managers is getting worse. In its latest issue of The Cerulli Edge - Europe Edition,

  5. Why the equity short bias hedge fund underperformed in April[more]

    From Marketrealist.com: The Barclay Equity Short Bias Hedge Fund returned -0.83% in April 2016. However, on a year-to-date basis, the fund provided a return of 3.4% through April 30, 2016. The equity short bias strategy works best when the Market is in a downturn. From January 2016 to mid-Febr