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BarclayHedge and TrimTabs: Hedge fund investors redeemed $10.8bn (0.6% of assets) in October

Tuesday, December 11, 2012
Opalesque Industry Update - BarclayHedge and TrimTabs Investment Research reported today that hedge fund investors redeemed $10.8 billion (0.6% of assets) in October, reversing a combined $9.8 billion inflow for August and September. Based on data from 3,040 funds, the TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets stood at $1.8 trillion in October, down 26.1% from the June 2008 peak of $2.4 trillion.

“From a cash-flow standpoint, the hedge fund industry has been losing ground for the past year,” said Sol Waksman, founder and president of BarclayHedge. “October’s redemptions pushed year-to-date outflows to $13.7 billion and 12-month outflows to $22.9 billion.”

Though the flow picture worsened in October, hedge fund investors reaped a net 0.21% gain in October while the S&P 500 Index fell 1.98%, TrimTabs and BarclayHedge reported.

The Hedge Fund Flow Report also showed that performance matters. During the past 12 months, the top 10% performing funds took in $4.8 billion and posted a median gain of 23.5%, handily beating a 15.9% increase in the S&P 500. In contrast, the 10% worst-performing hedge funds experienced outflows of $6.3 billion with a median 11.2% loss, underperforming the industry by 1,543 basis points. The report said the top 40% of hedge fund performers had outflows of $3.0 billion while the bottom 40% saw outflows of $25.2 billion.

“Hedge fund investors are doing fine if they’re buying into the best-performing funds,” said Charles Biderman, founder and CEO of TrimTabs. “Also, the massive outflows from the lowest-performing funds show investors are losing patience with the subpar returns that have plagued the industry over the past year,” Biderman said.

TrimTabs and BarclayHedge reported that the hedge fund industry gained 6.1% year-to-date while the S&P 500 Index rose 12.3%, and earned 4.2% over the past 12 months while the S&P rose 15.9%

The Hedge Fund Flow Report noted that over the past 12 months, the top three hedge fund strategies (Fixed Income, Multi-Strategy, and Macro) took in $43.6 billion while the bottom 10 strategies gave up $64.8 billion, yielding a net outflow of $21.1 billion.

“This underscores the industry’s lack of asset growth and its favoritism toward top-performing strategies,” said Leon Mirochnik, Vice President at TrimTabs.

Equity-related hedge funds continued to underperform the S&P 500 over the past 12 months, Mirochnik said. Equity Long Bias, the best-performing stock-based strategy of the bunch, managed a 4.8% return from November 2011 through October 2012, lagging the S&P 500 by 1,112 bps in the same time.

Of the eight global categories tracked by BarclayHedge and TrimTabs, funds based in China/Hong Kong topped the October performance list at 1.6% while Japan-based funds fared worst at -0.6%. Latin America funds had the worst outflows at 17.1% of assets in October, 26.4% y-t-d, and 29.1% over the past year, despite posting gains in all three time horizons.

Meanwhile, the November 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that fund managers’ bearish sentiment on the S&P 500 had reached a 12-month high, just a month after bearishness dipped to a 12-month low. Conducted in mid-November, the survey of 89 hedge fund managers also sought their views on the impending “fiscal cliff.” About three-quarters recommend some combination of cutting spending and increasing taxes, and the largest segment, 43.8%, urged some tax increases coupled with larger spending cuts.

Press release

bc

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