HFN industry overview: June 2011
On July 22, 2011 with 3,560 hedge fund products, reporting, HFN Hedge Fund aggregated Index was-1.16% in June and + 0.42% of the current year 2011 while S & P 500 Total Return Index (S & P) was-1.67% during the month and + 6.02% YTD.
Hedge fund industry highlights June:
• Total industry assets decreased approximately 0.91% to $ 2.562 trillion in June. Performance accounted for the majority of the reduction of the supply and net investors funding was a good thing for the month.
• The primary factors that affect performance in may continued in June and downward pressure on raw materials and increased risk aversion hurt CTA/managed futures and equity strategies for the second straight month.
• Fixed income strategies generally performed equity funds, but both groups were down in June. Mortgage sector funds posted returns lowest since November 2008, but the average yield was still positive.
• Japan focused funds posted their first positive overall results since the natural disaster in March. Resources in Japan had the best collection of regional results in June.
Before had may and June, the industry had two losing months in a row since the economic crisis. European debt crisis is likely to have resulted in reduced exposures to risky assets and losses in May and June was the result of this deleveraging. Defensive sectors and volatility strategies have done during the journey. Index HFN healthcare was + 4.10% in the second quarter and the HFN short Bias Index was + 2.80% in June.
HFN developed outliers ratio to determine which sectors producing returns outside of their normal ranges. In June, mortgage-related strategies, but positive on average, had the second lowest average ratio which is an indication that lower levels of gains and losses arise from the group.
China focused medium was the biggest drag on emerging market returns in June and equity EM strategies lost much more than the EM fixed income funds during the month. Exposure to India produced the only positive average regional yields from EM funds in June, + 0.02%, but for the year India funds still lagging all others-9.45%. Brazil is the only EM-group to remain in positive territory through the first half of 2011, + 2.88%.
For the second month, focused Australia funds declined more than any other developed market, falling-3.03% in June. The Group continued to be hurt by the fall in commodity prices and again could not surpass ASX under a month that dun, formerly a rarity for Australia focused funds.
Monthly access Flow estimates
• Estimated Total hedge fund assets at the end of June 2011 was $ 2.562 trillion, a fall of 0.91% or $ 23.6 billion in May.
• Performance accounted for a reduction of 28.1 billion dollar and investors accounted for a net inflow of 3.99 billion dollars.
• The core (% access change due to investor funding/redemption), growth was 0.17%, a decline in growth for the second month and second slowest growth rate in the past 12 months.
• Overall, the notorious AUM is now 15% during the historically high as in the second quarter of 2008.
The trend in Q2 was three months of declining growth. While investors continued to allocate more than was redeemed, moderated off. For the quarter investors to an estimated net 32.4 billion dollars for the year, a net of 75.3 billion dollars. This is much larger than either the first or second halves of 2010.
Some sector specific feeds
• The uptick in flows into Japan focused funds for the two months (April/May) after the disaster in March ended in June and the Group had little net outflows during the month.
•Insert the two months of net outflows, there was an increase in funds to funds investing in Latin America, while Eastern European focused funds continued the trend of redemption.
• For the first month of the last seven trading be focused funds had net redemption while credit strategies continued to grow at a higher rate than equity strategies.
The Angel's second consecutive month of higher than average loss, investors funding for tech sector funds continued in above average.
• Market neutral equity funds had the highest proportion of inflows strategy special in June and statistical arbitrage strategies suffered greater than average redemption.
Performance Review
Fixed income (FI) strategies
• The average return of all fixed income focused strategies was-0.18% in June and + 3.69% this year.
• Government bond strategies done best in June, + 0.41%. Mortgage strategies was the only other positive group + 0.10%. All other classifications to fixed income was down in June.
• Fixed Income Fund's assets increased 0,51% in June to an approximated 696.6 billion dollars. Investors to net 4.1 billion dollars during the month.
Equity capital (EQ) strategies
• The average return in all equity focused strategies was-1.13% in June, + 0.56% YTD.
• Short bias funds led all others in June, + 2.80%. Natural resource sector funds was at the other end of the spectrum,-3.10%.
Assets of • Equity fell an estimated-1.05% to 843.6 billion dollars in June. Investors that have been assigned a net 690 million dollars, the second lowest total in 2011.
Commodity and foreign exchange (FX) related strategies
• Broad natural resource commodity strategies was-2.56% in June and-2.34% YTD.
• Funds which invest in metals markets lost most in June-7.20-%. FX strategies followed their worst month since 2003 with another down month-0.66%, leaving Group-1.99% YTD.
• Agriculture sector funds led the sector commodity group, but were still down in June,-0.52%.
Summary analysis
Effects of broad market uncertainty seems to have finally materialized in the hedge fund flows in June. It is important to remember that an investor's decision to award or redeem General lag current or even a month earlier return data indicating June flows was evidence for increasing caution two or three months before. Given this scenario, probably it will be a slow start to the second half of 2011 in industry growth.
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