HFN industry overview: July 2011
August 23, 2011 with 3,518 hedge fund products, reporting, were index HFN Hedge Fund total + 0.36% in July and + 0.78% YTD in 2011, while the S & P 500 Total Return Index (S & P) was-2.03% during the month and + 3.87% YTD.
Hedge fund industry highlights July:
• Total industry assets increased approximately 0.26% to $ 2.567 trillion in July. Performance accounted for the majority of asset growth. net investment flows were negative for the month.
• Commodity and FX exposures that the main part of the very positive performance in July. Funds with primary exposure to metals markets returned an average of over 8%.
• Fixed income strategies performed again, equity funds, return the latter posting negative average for the third month.
• Mortgage sector funds continued to produce above average yields and average monthly positive performance for 32 months.
• Japan focused funds posted its second consecutive positive overall results since the natural disaster in March and the Group showed slightly positive in 2011.
Global markets continued on the edge in July ahead of the bad economic and political news from the United States together with the European debt issues continued to spread throughout the region. These negative trends have been positive for certain currencies, including the AUD, CAD, CHF and JPY. Rally on U.S. Treasury markets was a blessing to high yields and EM debt strategies.
HFN developed outliers ratio to determine which sectors producing returns outside of their normal ranges. In July, it was the commodity and FX strategies surprising that positive and equity sector focused (real estate, economy, health care), perform well, worse than average.
HFN regional benchmarks
Funds investing primarily in Russia and Australia tend to most closely track the performance of some commodity markets (energy, agriculture and metals). In July, this resulted in Russia and Australia, producing the best regional results, + 2.39% and + 1.75%, respectively. Funds investing in China and over many regional markets in Asia performed above the average in July, with India is the exception.
The economies of both India and Brazil have faced with high inflation and must be counteracted by increasing certral bank lending rates. For Brazil focused funds, have the result in 2011 poorly performing stock markets, but strong credit markets. Brazilian equity funds returned an average of-3.20% in July and-0.23% in 2011, while fixed income strategies was + 1.90% in July and + 8.93% in 2011.
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 failed to surpass the ASX under a down month, previously a rarity for Australia focused funds.
Monthly access Flow estimates
• Estimated Total hedge fund assets at the end of July 2011 was $ 2.567 trillion, an increase of 0.26%, or $ 6.8 billion from June.
• Performance accounted for an increase of 20.9 billion dollars and investors accounted for a net outflow of 14.1 billion dollars.
• The most important growth/decline (% access change because investors appropriation/redemption) were-0.55%, the first core decline since June 2010 and the largest since the beginning of 2009.
• Total the notorious AUM still 14% over the historically high in Q2 2008.
NET output in July was a continuation of the trend in Q2 marked three months of declining growth. Despite net outflow and the trend of decline, the industry still took in an estimated 55.0 billion dollar net new award 2011.
Some sector specific feeds
• The flow of assets to Japan focused funds resumed in July, but at a moderate pace compared with two months after the earthquake.
• The need was a jump in redemption from emerging market strategies in July, led by a large net outflow of funds investing in new Europe. Grandmothers focused resources also experienced a net reduction in AUM from investors.
• Commodity strategies had a payout for the second consective month and both capital and credit strategies investors experienced net outflows.
The Angel far above average industry returns in 2011, there was a net redemption of mortgage sector funds in July.
• On a policy level, had the only multi-platform strategy and convertible arbitrage NET investors allocations in July. Regulation d and option strategies, experienced the highest levels of depression.
Performance Review
Fixed income (FI) strategies
• The average return of all fixed income focused strategies was + 0.55% in July and + 4.16% for the current year.
• Emerging credit market strategies done best in July, + 0.87%, followed by mortgage sector funds, + 0.67%.
• Fixed income assets fell 0.82% in July to an approximated 690.5 billion dollars. Investors redeemed NET 7.8 billion dollars during the month.
Equity (EQ) strategies
• The average return all capital focused strategies was-0.29% in July and + 0.25% YTD.
• Natural resource sector funds led all others in July, + 1.42%. Health sector funds performed worst,-0.98%, followed by technology and financial sector funds-0.92% and-0.91%, respectively.
The assets of • Equity fell an estimated-1.06% to 834.8 billion dollars in July. Investors redeemed NET 8.6 billion dollars during the month.
Commodity and foreign exchange (FX) related strategies
• Broad natural resource commodity strategies was + 2.52% in July and + 0.59% YTD.
• Funds that invest in metals markets that went from the biggest losers in June to produce the highest returns in July, + 7.20-%. FX strategies increased an average of + 1.30%. Both groups have given negative average yields this year.
The decline in equity markets, funds targeted at financial futures rose + 2.57% in July.
Summary analysis
Effects of broad market uncertainty materialized in hedge fund flows in June and has been featured with meaningful exchange in July. The decisions to allocate or redeem generally is present or even a month earlier return data indicating Julius redemption is a reflection of May and June performance. Historically tend flows to reverse faster with positive return means August is likely to see net inflows on the back of Julius returns, but there is still a high degree of uncertainty in global markets which should keep inflows turned off.
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