Future hedge fund inflows look positive, according to a Goldman Sachs Capital Introduction team survey reviewed by ValueWalk. The positive outlook for the hedge fund industry comes as it delivered positive returns for five consecutive months, according to data from HFR. The HFRI Fund Weighted Composite Index pushed higher by +0.24 percent for the month, doubling the performance of the S&P 500 on the month.

 

hedge fund inflows Goldman Sachs HEdge fund
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Goldman Sachs: Hedge funds inflows expected to be up in the second quarter of 2017

With hedge funds under fire, and fees coming into sharp focus, the near term outlook for hedge fund inflows is positive. In a Goldman Sachs survey of 168 asset allocators, representing $451 billion in assets under management, the majority, 50.6%, said they intended to increase their hedge fund allocations while only 17.3% said they plan on decreasing their allocations.

The first quarter witnessed $6.69 billion in gross redemptions with $9.43 billion in subscriptions, resulting in net inflows for the quarter of $2.75 billion of those hedge fund allocators Goldman surveyed. The 1.09% global net weighted asset flows was contrasted by US managers slightly underperforming, with 1.05% net asset weighted flows, and Asia being the best performer on a percentile basis at 2.14% albeit with lower gross net inflows and outflows.

Of those allocators making redemptions in the Goldman survey, 46% are moving to cash, 38% made the redemptions to satisfy their own pension fund redemption needs, and 26% plan to invest in other asset classes, with private equity and fixed income witnessing the largest increase.

Fixed Income hedge funds up, but Tech and Healthcare focused funds big winners year to date, marking a turnaround

Fixed Income, a hedge fund category expected to see net inflows in the second quarter, was also a winner in the month of March, data from HFR shows.

The HFRI Fixed Income-Asset Backed Index was up 0.79% on the month, bringing the yearly total to a positive 2.82%, showing the highest gains. The HFRI Fixed Income-Sovereign Index was up only 0.33% on the month but has delivered 2.67% performance on a yearly basis. Likewise, the HFRI Fixed Income-Corporate Index was up only 0.19% on the month but is stronger by 2.52% on the year.

The biggest monthly winner was the HFRI Macro Currency Index, up 2.71%, while the HFRI EH Sector Technology index closely followed, up 2.66%. The Technology index is up 5.60% on the year and closely follow stock-based strategies on the leader board. The biggest winner year to date is the HFRI EH Sector Healthcare index, up 6.73%, followed by the Technology / Healthcare Total index, up 6.09%. The biggest loser on the month and year was the HFRI EH Short Bias Index, down -1.53% on the month and 5.06% on the year at a time when the S&P 500 index with dividends was up 0.12% in March and is up 6.06% year to date.

“Hedge funds gained in March as the Federal Reserve proceeded with a widely anticipated interest rate increase concurrent with a weakening of the Trump trade, and as US equities concluded a strong first quarter with mixed performance in March,” Kenneth J. Heinz, President of HFR, said in a statement. “In a similar manner to the 2016 intra-year market cycles that were driven by Brexit and the US election, 2017 financial market performance is likely to be driven by similar intra-year cycles, including upcoming European elections, with these contributing to and creating opportunities for hedged long/short strategies across different asset classes. Funds positioned for this environment are likely to lead industry growth and performance in 2017.”