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Hedge funds attract $3.6bn in November, reversing surge of redemptions

Wednesday, January 04, 2012

Sol Waksman
Opalesque Industry Update – Global hedge funds attracted around $3.6bn in November as investors poured money into the industry, effectively ending months of heavy withdrawals, fresh data showed on Tuesday.

“After months of outflows across nearly every hedge fund category, November saw outflows in only two investment styles: Emerging Markets, which shed $1.3bn, and Equity Long-Short, which shed $1.0bn,” says Sol Waksman, founder and President of BarclayHedge, a hedge fund data vendor.

According to a survey by BarclayHedge and TrimTabs Investment Research, a U.S.-focused independent research house, November was a welcome reversal after the previous months’ wave of redemptions. Hedge funds withdrawals surged to $9bn in October after hitting $2.59bn in September.

Industry assets rose to $1.71tln in November from $1.67tln in October, the first increase after five months of declines.

The Barclay Hedge Fund Index compiled by BarclayHedge dipped 0.8% in November after increasing 3.5% in October. The index is currently up 0.05% (est.) in December and down almost 5% for 2011.

But despite the rise in assets, the hedge fund industry’s size is still below the $2tln peak recorded earlier in 2011.

The heaviest inflows for November were Multi-Strategy at $1.5bn (5.75% of assets) and Macro at $981m (8.5% of assets).

In another study, the TrimTabs/BarclayHedge Survey of Hedge Fund Managers (which involved 101 managers) revealed that a growing number of fund managers are growing confident and less bearish on U.S. equities. Bullish sentiment on the S&P 500 stands at 42% in December, the second-highest reading this year. Bearish sentiment dropped to 30%, the lowest reading since July 2011, from 36% in November. Managers were markedly bullish in only three months of 2011: January, July, and December.

When asked whether the Federal Treasury would initiate a new round of quantitative easing this year, managers expressed opposing views; most believe unemployment will be below 8.5% by the end of 2012, and expect value investing to be more profitable than growth investing.

A third on gold
A third of those surveyed expect gold to be the best-performing commodity of 2012 and more than half expect oil or natural gas to come out on top.

This belief is shared by Andreas Maag, the Executive Director EMEA & APAC, and Head of Precious Metals Sales at UBS Investment Bank, who told Opalesque last month that gold is still a safe bet for investors in 2012 (See Opalesque Exclusive here).

Maag said that gold still represents a safe haven for investors despite price corrections and some correlation to the equity markets. "People have had to make their margin calls, and to do that some are selling gold, so you've seen the price go down. But the question is, should investors get out of gold completely and take profits or keep it as insurance."

But this sentiment was countered by billionaire George Soros who believes that the gold bubble is going to burst; he cut 99% of his gold holdings in gold in the first quarter. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year.

Hedge funds lost $9.4bn in November - Eurekahedge
Meanwhile, the hedge fund industry suffered losses of $9.4bn during November on the back of losses and withdrawals, according to hedge fund tracker Eurekahedge, which reckons that hedge funds finished November with $1.73tln in assets – not far from BarclayHedge/TrimTabs’ estimate of $1.71tln.

Data from Eurekahedge showed that net outflows during November totalled $9.4bnin as panicked investors sought shelter from the Eurozone debt crisis. Performance-based losses ate into another $500m of assets. Hedge funds endured four straight months of negative asset flows, with net redemptions hitting $52bn over the period.
Precy Dumlao
Edited B. Gravrand

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