AppId is over the quota
Click here to read the full report.
eA|HFN Industry Overview: September 2011
On October 21, 2011 with 3,168 hedge fund products reporting, the HFN Hedge Fund Aggregate Index was -3.09% in September and -5.58% YTD 2011 while the S&P 500 Total Return Index (S&P) was -7.03% during the month and -8.68% YTD.
Hedge Fund Industry September Highlights
•Total industry assets fell an estimated 2.92% to $2.463 trillion in September. Performance accounted for the majority of the asset decrease and net investor flows were negative for the month.
•Average hedge fund return in Q3 was -5.97% and investors withdrew an estimated net $19.3 billion. These represent the first quarterly loss and net redemption since the financial crisis.
•Falling commodity prices along with volatile equity markets and large losses from emerging market funds weighed most heavily on hedge fund returns in September.
•Fixed income strategies continued to outperform equity funds, the latter posting negative average returns for the fifth consecutive month and falling -9.34% in Q3 vs. -1.39% for FI strategies.
•Mortgage sector funds posted their second consecutive aggregate decline and their worst return monthly since November 2008, however the HFN Mortgages Index was +9.28% through Q3 2011.
High volatility across most major markets was the norm in September caused primarily by the ongoing sovereign crisis in Europe and worries over the size and timing of the EFSF bailout fund. The resulting reduction of exposures to risky assets during the month appeared to benefit FX strategies and funds focused on government bonds. Their aggregate returns were +1.88% and +1.12%, respectively, during the month.
HFN developed the Outlier ratio to determine which sectors are producing returns outside of their normal ranges. In September, the ratio highlighted emerging markets as a sub-sector which was hit particularly hard with their worst performance since October 2008.
Regional Benchmarks
No regional specification produced aggregate positive returns in September. Emerging market exposures were most negatively impacted. Funds investing in Russia lost an average of -13.01% which is bad, but not nearly the -28.20% decline seen in October 2008. Conversely, losses from funds investing in Brazil and China were nearly on par with their declines during the financial crisis. Only funds investing in developed European markets and in Japan lost less than 1% on average during the month, -0.38% and -0.91%, respectively.
Performance from funds investing in developed European markets was relatively good in September. The Stoxx Europe 600 Index was -4.74% during the month compared to the median return from equity strategies focused in the region of -0.95%; the HFN Long/Short Equity Index was -4.14%. Investors continued to withdraw assets from developed Europe funds at an above average rate in September.
Monthly Asset Flow Estimates
•Total estimated hedge fund assets at the end of September 2011 were $2.463 trillion, a decrease of -2.92%, or $74.1 billion from August.
•Performance accounted for a decrease of $59.5 billion and investors accounted for a net outlfow of $14.5 billion.
•The core rate of growth/decline (% asset change due to investor allocations/redemptions) was -0.57%, the second monthly decline of Q3 2011.
•There was a net investor outflow of $19.3 billion in Q3, the first quarterly outflow since Q1 2009. Redemptions were nowhere near the scope of that quarter when the industry lost an estimated $215 billion.
With increased volatility and performance losses emerging, investor flows began to slow in May 2011 and eventually shifted to net redemptions in July. The net outflow in September was the largest since April 2009. Allocations and redemptions have a history of lagging performance by a few months which would indicate net outflows may persist.
Sub-Sector Specific Flows
•Investors withdrew more than they allocated to Japan focused funds in September at a rate above the industry average. Developed Europe focused funds also faced net investor outflows for the fourth month in the last five.
•Emerging markets funds continued to lose assets at an above average rate in September. The group had an estimated $1.8 billion in net redemptions during the month and $4.8 billion in Q3.
•Investors appeared to be reducing exposure to credit strategies during Q3 as redemptions came at a higher rate than that of equity strategies for the first quarter since Q1 2010.
•Fixed income arbitrage and event driven strategies had among the highest rates of net outflow in September. Global macro was among the few strategies with net allocations.
•Asia domiciled funds continued to increase AUM due to net investor flow in September. The region has seen above average growth rates throughout 2011.
Performance Review
Fixed Income (FI) Strategies
•The average return of all fixed income focused strategies was -0.80% in September and +2.37% year-to-date.
•Government bond strategies again performed best during the month, +1.12% and corporate credit strategies were -2.17%.
•Fixed income fund assets fell for the third consecutive month, -2.37% in September to an estimated $676.4 billion. Investors redeemed a net $11.2 billion during the month.
Equity (EQ) Strategies
•The average return of all equity focused strategies was -4.42% in September and -8.68% YTD.
•Energy focused funds were down most, -8.10%, followed by small cap strategies and healthcare funds, -5.88% and -5.21%, respectively.
•Equity fund assets fell an estimated -5.03% to $769.5 billion in September. Investors redeemed a net $4.4 billion during the month.
Commodity and Foreign Exchange (FX) Strategies
•Broad natural resource commodity strategies were -0.53% in September and +0.26% YTD.
•Returns were again varied by sector. Funds investing in metals markets were -13.5% while agriculture funds were +0.03% during the month.
•Funds targeting financial futures again withstood market volatility relatively well, +0.13%, and FX strategies had some of the best overall performance in the industry, +1.88%.
Summary Analysis
The European sovereign debt crisis, operation twist embarked upon by the U.S. Federal reserve, evidence of China’s slowing economy and their housing market topping out were all stated by managers as contributors to the high level of volatility in September. October asset flows will be a good bellwether for the rest of the year as typically outflows would be expected with the continued performance losses. It is possible investors recall the missed opportunities following 2008 and currently invested capital may be more sticky, or new money may come in more quickly. Regardless, 2011 is shaping up to be the second year of annual performance losses on record for the hedge fund industry and investors will be hunting for investments which can match their rising budgetary needs.
Click here to read the full report.
No comments:
Post a Comment