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Hedge funds grab over $8bn in asset inflows in May, commodities heavily favored by investors

Monday, July 11, 2011
Opalesque Industry Update – Despite finding themselves mostly flat in performance this year, hedge funds took in $8.1bn in May, bringing YTD inflows to $75bn. However, the volatile markets of 2011 have still taken their toll and total industry assets remain unchanged at $1.79tln reports TrimTabs Investment Research and BarclayHedge.

“Hedge fund investors have been pouring money into funds,” explains Sol Waksman, founder and President of BarclayHedge. “The industry hauled in $75.0 billion in the first five months of 2011, which marks the heaviest such inflow since 2007. Performance, however, has hardly been stellar. The Barclay Hedge Fund Index shows a year-to-date return of just 2.1% through May, and many managers are in the red for the year.”

Fixed income funds have been standout performers this year (one example being the Barnegat Fund which has returned +12.% YTD – see previous story: here) and investors have rewarded them with net inflows 12 out of the past 13 months. “Additionally, bond mutual funds and ETFs, especially Treasury funds, are posting sizable inflows. We are interested to see how investors behave — and how fixed income managers perform — now that the Fed is no longer buying Treasuries,” says Minyi Chen, Vice President of Quantitative Research at Trim Tabs.

But the biggest winner in uncertain times remains commodities. CTAs garnered nearly half of the inflows in May ($4.5bn) the sixth straight month in a row that investors looked to gain additional exposure to commodities. But while commodities have been popular with investors, CTA funds have not managed to perform as well as strategies such as emerging markets and fixed income, and Chen urges caution regarding commodities strategies, especially due to the fact that these firms have seen some of the heaviest asset inflows.

Also reporting inflows in May were funds of hedge funds ($3.8bn) and multi strategy funds ($2.6bn).

Kirsten Bischoff

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