Investors Added $6.57B into Hedge Funds in May; Macro Inflows Ahead Of Brexit via eVestment
The hedge fund industry’s assets climbed above the psychological $3 trillion milestone for the first time in 2016 as investor allocations were positive for the third month in the last four. It appears the redemption pressures from last year’s underperformers is abating as new money continues to come in to those who did well in 2015.
Interest remains high for commodity funds, while investors removed money from exposure to Europe, both in the form of investment region and as a firm domicile, leading up to the historic BREXIT vote.
Total industry assets now sit at $3.015 trillion for the moment, however remaining at this level is tenuous in the face of what will likely be aggregate industry performance declines in June.
Investors Take Money Out of Europe Pre-BREXIT Vote
Investors removed assets from hedge funds investing primarily in European markets and from funds located in Europe in May. An estimated $1.7 billion was removed from hedge funds focused on European markets and an estimated $3.3 billion was removed from managers domiciled in Europe in May. The outflows, coming the month before the UK’s vote to leave the European Union, are a rarity for both universes which had been experiencing significant and persistent allocations prior to May.
• Investors added $6.57 billion into hedge funds in May, the third month in the last four the industry has gained assets.
• Allocations to commodity strategies continued in May. The universe is in the midst of an unprecedented string of positive investor sentiment.
• Macro funds continued to gain new assets ahead of the BREXIT vote, despite exposures indicating many large funds were positioned for losses should the GBP depreciate.
The weight of redemption pressures on the industry from 2015’s underperforming managers abated in May. With less money being removed from that segment, the steady flow of money coming into funds which performed well in 2015 resulted in net inflows
for May. Despite net inflows in three of the last four months, investor flows for 2016 remain negative for the year. In the first five months of 2016, investors have removed a net $8.5 billion from hedge funds.
• It is very clear that the apparent negative sentiment toward the industry in 2016 is the result of dissatisfaction with only a portion of the industry. In 2016, investors have redeemed an estimated $83 billion from 2015’s underperformers, while adding $74 billion to those producing gains in 2015.
• After a difficult seven-month stretch ending in March 2016, during which $15.2 billion was removed from macro hedge funds, the group experienced its second consecutive month of elevated inflows in May. There still appears to be an elevated level of dissatisfaction with 2015’s underperformers, but that is being more than offset by allocations to those who have performed well, with a focus on large funds.
Full report below