Hedge funds across the world posted their largest loss for 12 months in June, as heightened fears of slowing growth in China and the tapering of the Federal Reserve’s bond buying program hit performance, new research has found.
Total assets under management declined by $21 billion over the month to $1.89 trillion, according to hedge fund database Eurekahedge. This decline was mostly a result of poor performance, with managers losing a total of $18.84 billion in June. Before the sell-off hedge funds had a seven month streak of inflows from November 2012.
Eurekahedge Hedge Fund index Is Still Positive YTD
The benchmark Eurekahedge Hedge Fund index declined 0.69 percent in June while the MSCI World Index was down 3.10 percent over the month, as risk off trades defined June on Federal Reserve comments that a wind down of the asset purchasing program may start as early as the end of the year. The index is still positive at +2.47 percent YTD. A clarification of the Federal Reserve position on asset purchases came earlier this month, leading to a slight rebound in US equities. The report shows that asset flows are also expected to rebound by the end of the month raising industry AUM to $1.3 trillion.
North American funds Experiencing First Month Of Negative Flows This Year
Fixed income and North American hedge funds both suffered their largest performance-based decline in almost two years, according to the report, with North American funds experiencing their first month of negative flows this year. Europe, Latin America and Asia ex-Japan hedge funds also saw outflows over the month.
Focused Hedge Funds Saw Positive Asset flows In June
“June witnessed some heightened risk aversion in global markets amid slowing economic growth in China and the US Federal Reserve’s indications that it might scale back its bond buying program,” the report said. “With the exception of Japan, all regional mandates ended the month in negative territory with Asia ex-Japan focused hedge funds seeing the largest decline.”
Japan-focused hedge funds saw positive asset flows in June after a 12-month run of outflows, which saw funds investing in Japan losing $4 billion between June 2012 and May this year.
Hedge Fund Launch Activity Is On The Rise
Launch activity is on the rise with some 300 funds launching so far this year. In terms of strategies, distressed debt funds end 11-month winning run after gaining 21 percent from June 2012 to May 2013. CTA/ managed futures funds are in negative territory for the year, down 1.35 percent YTD.