HFN industry overview: May 2011
On June 21, 2011 with 3,235 hedge fund products, reporting, HFN Hedge Fund aggregated Index was-1.06% in May and + 1.62% of the current year 2011 while S & P 500 Total Return Index (S & P) was-1.13% during the month and + 7.82% YTD.
Hedge fund industry highlights may:
• Total industry assets decreased approximately 0.79% to $ 2.586 trillion in May. Performance accounted for the majority of the reduction of the supply and net investors funds were positive for 11th month.
Sv?ltf?dda performance drivers in April reversed in May with losses manifest in CTA/managed futures strategies together with energy and technology focused equity funds.
• Credit strategies generally performed the rest of the industry, led again by mortgage funds, but gains were also some EM interest in markets and short European sovereign debt.
• Japan focused funds was down for the third straight month, and has lost nearly 5 percent on average since the earthquake in March.
The sharp turnaround of the US dollar and the slide in commodity prices were the most obvious indicators of a global reduction in exposure to risky assets during the month. Despite the overall capital market image were pockets of strong returns for hedge funds in the health sector and positive performance, albeit small, for small/micro cap related strategies. Mortgage funds continued to produce positive returns and, together with health funds is the only strategy/sector groups that have performed the S & P 2011.
HFN developed outliers ratio to determine which sectors producing returns outside of their normal ranges. In may, it was the tech sector, CTA/managed futures and global macro strategies produce abnormally negative total returns.
HFN regional benchmarks
Emerging market shares related returns, mainly Russia and India focused strategies, was the biggest drag over EM returns in May while all emerging market regional exposure produced negative average yield, was EM debt strategies positive for that month. Index HFN emerging markets are barely positive during the year, + 0.12%, the lowest level through the first five months of the year since 2008 and the second as the lowest since the Russian financial crisis in 1998.
Australia focused funds declined more than any other developed market in may, falling-2.28% during the month. The Group seemed to have ridden the wave of rising commodity prices by late 2010, but suffered during the sell off in may, the Group has performed ASX indexes, even in the months after the index has risen, but losses in may reflected ASX downturn.
Monthly access Flow estimates
• Estimated Total hedge fund assets at the end of May 2011 was $ 2.586 trillion, a decrease of 0.79% or 20.5 billion dollars from April.
• Performance accounted for a decrease of 31.9 billion dollars and investors accounted for a net inflow of 11.4 billion dollars.
• The core (% access change due to investor funding/redemption), growth was 0.44%, a reduction from April and only slightly over the previous 12-month average.
• Overall, the notorious AUM is now 14% over the historic high in Q2 2008.
NET flow information investors continue to show interest to invest directly into hedge funds, a trend which has continued for several months. Despite decreasing core share growth showed may the 11th straight month inflows of net appropriation. Monthly total assets decline was only the fourth since April 2009, the last month of massive redemption inflows after the crisis.
Some sector specific feeds
• Investor appear to believe there is profits investing in Japanese markets. NET investment flows into Japan focused hedge funds has been above average in the industry over the past two months.
• Commodity focused funds led the inflow of investment market in may, followed by four classifications of debt. Flows into the mortgage, convertibles, sovereign and corporate bond funds gone equity fund flows.
• Funds investing primarily in European markets have experienced significant fluctuations in the investors ' interest. In April, but inflows jumped in may for more money left than was allocated, which had been the trend for several months until April.
• Money laundering continued to flow onto the technical sector funds, although the total outsized losses during the month. Health strategies also saw a blip of positive money flows.
Performance Review
Fixed income (FI) strategies
• The average return of all fixed income focused strategies was + 0.43% in May and + 3.63%-years.
• Mortgage funds done best in may, + 1.52% while distressed strategies posted moderate declines,-0.23%.
• Fixed Income Fund's assets increased 1.17% in may for an estimated 693.1 billion dollars. Investors to net 5.1 billion dollars during the month.
Equity capital (EQ) strategies
• The average return in all equity focused strategies was-0.84% in May and + 1.15% YTD.
• Funds investment in the health sector shares had the best results, + 1.54%, followed by those who invest in small/micro cap issues, + 0.29%. Energy sector funds had the most difficult month,-2.43%.
Assets of • Equity fell approximately 0.71% to 852.5 billion dollars in may, Investors allocated a net $ 1.9 billion, a decline from April and during the previous 12-month average.
Commodity and foreign exchange (FX) related strategies
• Broad natural resource commodity strategies was-3.28% in May and-0.16% YTD.
• Funds which invest in FX markets gave back most of April's profits, 2.45% and is now-1.01% for the year.
• Only agriculture funds had total profits in may, + 1.51% and funds investing in metals markets fell most,-3.53%.
Summary analysis
The influx of capital, money is flowing into hedge funds has continued in the above average pace, be a vote to the lack of confidence in direct investments in traditional markets. The vast majority of stock markets has negative territory in June, Greek debt crisis, the European credit markets are at a point in constant change and commodity prices are mixed with energy prices continue to decline. These factors point to another difficult month for total hedge fund returns, but it may be the second consecutive month when industry superior broad equity markets.
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