TrimTabs Investment Research and BarclayHedge reported that all hedge funds posted an estimated outflow of $3.8 billion in December 2009.
Decembers outflow is the industrys first since July 2009. At the same time, hedge fund assets grew to a 12-month high of $1.5 trillion thanks to an unprecedented 10-month winning streak.
Decembers relatively small outflow is almost certainly seasonal, a product of quarter-end and year-end redemptions, says Sol Waksman, CEO of BarclayHedge. Hedge funds experienced outflows in December in each of the past five years, and we suspect inflows have already resumed.
In addition, funds of hedge funds posted an estimated outflow of $6.3 billion in December, bringing redemptions for all of 2009 to $180.9 billion. Funds of funds returned only 10.24% in 2009, less than half of the industrys average 23.9% gain. Funds of hedge funds turned extremely risk-averse after the late 2008 sell-off, says Vincent Deluard, Global Equity Strategist at TrimTabs. Their conservative strategy allocation and large cash balances hurt their returns during this rebound.
At the strategy level, Convertible Arbitrage and Emerging Markets funds showed the highest returns this past year, delivering gains of 53.59% and 43.85%, respectively. Inflows were strongest for Commodity Traded Advisers and Equity Market Neutral funds, the two strategies which performed best during the late 2008 sell-off.
Funds with the highest fees experienced the smallest redemptions this past year. Says Deluard. Hedge fund investors are still willing to pay for good managers; the funds with the highest fees also delivered the best returns, rising an average of 36.5% this past year.
The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies.
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