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eA |HFN industry overview: October 2011
November 22, 2011 with 3,525 hedge fund products, reporting, HFN Hedge Fund aggregated Index was + 2.37% in October and-3.61% YTD 2011 while S and P 500 Total Return Index (S & P) was + 10.93% during the month and + 1.30% YTD.
Hedge fund industry October highlights
• Total industry assets increased approximately 1.01% to $ 2.484 trillion in October. Performance accounted for the majority of the asset increases and net investment flows were negative.
• Equity market exposure was the primary positive performance driver in October. Credit strategies has lagged, but were positive and raw material resources, especially those with high exposure to FX markets brought down the total hedge fund returns.
• The total performance reasons that month came from sectors and policies that were down significantly in Q3 and remains negative for the year, with the exception that the health-focused resources.
• UCITS structured hedge funds dragged the broad industry in October and is-7.15% YTD. UCITS products, virtually aggregated and long/short equity only has consistently crisis management HFN Hedge Fund Long/Short Equity and aggregate indices of 2011.
Shows that defensive positioning of equity focused funds, muted returns from non-irritable credit and relative value strategies and losses from managed futures funds, likely due to long exposures to the US dollar, resulted in overall hedge fund returns significantly lags the massive capital market increase. There are pockets of strong results, but in the months that October is not expected that the industry keep pace with the stock markets.
HFN developed outliers ratio to determine which sectors producing returns outside of their normal ranges. In October, illuminated mortgages relationship, managed futures and fixed income arbitrage strategies sub-sectors abnormally crisis management in October.
Regional benchmarks
A complete reversal from September produced all regional exposure specifications total positive return in October. Emerging market exposure was most positively influenced by the market exuberance with Russia and Brazil focused medium tip.
Funds investing in Russia received an average of 9.80% which reduced average losses in the lower-14.20% YTD. Russia focused fund performance 2011 has been poor, but the funds investing in India and in the MENA region has been worse-21.29% and-15.84%, respectively. After an average of + 6.27% in October, funds investing in Australian markets are only regional exposure are positive in 2011. Funds investing in Japan seems very defensively positioned in October. The group is much equity oriented, but 70% of reporting medium produced negative returns one month after the Nikkei rose + 3.31%.
Monthly access Flow estimates
• Estimated Total hedge fund assets at the end of October 2011 was $ 2.484 trillion, an increase of 1.01% or 25.0 billion dollars from September.
• Performance accounted for an increase of 25.7 billion dollars and investors accounted for a net outflow of 770 million dollars.
• The most important growth/decline (% access change due to investor funding/redemption) was-0.03%, the closest to the flat reading then eA |HFN started tracking monthly flows in 2009.
• In the first 10 months of 2011, investors have put estimated 48.4 billion dollars to the hedge fund industry.
Despite the net outflow from investors in October, third in the last four months, it is more important sharp reversal of trend from Q3 when there were two months above average investor redemptions.
Some sector specific feeds
• The post natural disaster impact of net investor inflows into Japan funds seem to have disappeared. Investors withdrew more than the assigned Japan focused funds in October for the third month in a row and at a rate which has risen in each of the past three months.
• Flows to commodity focused and managed futures strategies jumped in October along with diversified sectors funds, giving defensive positioning from investors.
• Investor's redeemed more than assigned to mortgage related strategies for second month in a row and increased pace in October.
• Funds lies in Asia continued to attract assets in above average in October, but funds investing in Asian markets had their second month of above average outflow. Developments prior to September had been both classifications to attract new assets.
Performance Review
Fixed income (FI) strategies
• The average return of all fixed income focused strategies was + 1.04% in October and + 3.13% for the current year.
• Corporate and emerging market focused funds that performed best during the month, + 2.44% and + 1.57%. Distressed credit funds were + 2.25%, underperforming broadband needy universe that was + 3.01% in October.
• Fixed Income Fund's assets rose 0.23% in month to 671.8 billion dollars, but the increase was solely performance driven. Investors redeemed NET 4.44 billion dollars during the month.
Equity capital (EQ) strategies
• The average return of all equity focused strategies was + 3.90% in October and-5.13% YTD.
• Funds with a bias towards value investing most participated in the equity market rally, rising an average of + 6.46%.
• Equity assets increased approximately 3.15% to 795.6 billion dollars in October, but investors redeemed NET 3.87 billion dollars during the month is still a heightened pace.
Raw materials and strategies for Foreign Exchange (FX)
• Natural resource specific commodity strategies was + 1.90% in October and + 1.94% YTD.
• Agriculture funds was + 2.32% during the month, and metals markets funds returned an average of + 0.71%. The two differ on the basis of YTD returns an average of + 6.94% and-15.43% respectively.
• Funds targeting financial futures and FX markets were both closed in October,-1.58% and-1.85%, respectively.
Summary analysis
October's rally was a sharp reversal of the previous two months trend and subsequently represented the hope that the European sovereign situation would have a resolution in sight with the announcement of the size and scope of the EFSF. Punctuated by Spain's sub par bond auction, November seems to be a return to reality and some of the trends prevailing in Q3, namely weak equity markets and a strong US $. These environments again likely will favor relative performance of the equity strategies in their respective markets, credit strategies will again likely to outperform stocks and global macro managed futures strategies will be mixed, but mostly positive, if they weren't shaken Webcast currency reversal. At this rate, it is likely it will be his second negative year total returns in the last four digits, the first time in its relatively short history.
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