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Hedge funds post outflow of $3.7bn in June 2010; hedge fund managers more upbeat on S&P 500 and less bullish on U.S. dollar according to survey

Tuesday, August 10, 2010

Opalesque Industry Update - TrimTabs Investment Research and BarclayHedge reported that the hedge fund industry posted an estimated outflow of $3.7 billion, or 0.2% of assets, in June 2010, following an inflow of $4.9 billion in May and an outflow of $2.5 billion in April. The industry posted negative returns of 3.2% in May and 1.1% in June, the first two-month losing streak since January and February 2009.

“Redemptions probably persisted through July, and they could pepper the remainder of the year,” said Sol Waksman, founder and president of BarclayHedge. “Even if performance hadn’t been poor in May and June, July is historically one of the worst months of the year for fund subscriptions, and seasonality will be working against inflows through December.”

The TrimTabs/BarclayHedge Survey of Hedge Fund Managers for July reveals that 34% of 99 respondents are bullish on the S&P 500, up sharply from 19% in June. Only 22% are bullish on the U.S. dollar, down from 36% in June. Additionally, a quarter of hedge fund managers put the odds of a double-dip recession at greater than two in three, while inflation expectations are balanced.

“Indecision about the economic future might explain the somewhat contradictory strength in metals and U.S. debt,” said Vincent Deluard, Executive Vice President at TrimTabs. “Many managers are ‘unusually uncertain’ about the inflation outlook, so they seem to be covering their bases with both gold—in case inflation accelerates—and long-term Treasuries—on deflation thinking.”

Hedge fund investors were risk averse in June, favoring defensive strategies over the riskiest funds. Emerging markets funds redeemed $2.1 billion, the largest outflow of any strategy, while fixed income funds received $1.4 billion, the largest inflow. Funds of hedge funds posted an outflow of $4.6 billion, bringing year-to-date redemptions to $15.2 billion, while commodity trading advisers posted a fourth straight monthly inflow.

“Fixed income funds are up 6.4% this year, far and away the best performance of any strategy, but caution is in order,” noted Deluard. “Ten-year Treasury yields have slipped below 3%, two-year note yields sit at 0.56%, and bond mutual funds and ETFs have taken in a staggering $708 billion in the past 16 months. It seems to us that investors are trying to squeeze blood from turnips.”

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.

BarclayHedge is a leading hedge fund data vendor and one of the foremost sources for proprietary research in the field of alternative investments. From its origin as a research specialist and performance measurement firm, BarclayHedge has developed complete client services as a publisher, database and software provider, and industry consultant.

TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity--including mutual fund flows and exchange-traded fund flows--as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. Source

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