Redemption Pressure and Reallocation Continues in Hedge Funds
Hedge fund withdrawals in June 2012 have spiked to the highest level since October 2009 according to data tracked by GlobeOp Financial Services. Funds saw net outflows of almost 1.17 percent out the total $187 billion in assets. This is the highest level of net outflows since October 2009, when the net outflows were 3.76 percent.
While this reflects lack of appetite in a choppy market, GlobeOp sees nothing amiss in the trend. "July flows again reflected quarterly re-allocations by investors. While outflows exceeded inflows for the month, the outflow is very much in line with prior quarter ends." said Hans Hufschmid, chief executive officer, GlobeOp Financial Services in a press release.
Interestingly, the hedge fund industry had achieved its best first-quarter performance since 2006 this year with hedge funds gaining nearly 5 percent in the first two months of 2012. However, the trend changed as uncertainty over the Eurozone debt crisis deepened and the industry posted three straight months of decline, including a decline of -2.4 percent in the volatile month of May. The average fund is now up 1.7 percent in the first six months of 2012 according to Hedge Fund Research.
According to TrimTabs and BarclayHedge Report, outflows added up to $18.8 billion from June 2011 to May 2012, compared to inflows of $96.2 billion from June 2010 to May 2011.
Hedge funds based in Continental Europe lost 25.5% of assets from June 2011 to May 2012 while Japan-based hedge funds emerged as investor favorites with inflows of 20.1 percent even as they generated some of the worst returns of negative 8.2 percent.