20 Oct 2011
Hedge Fund Research Inc has reported that hedge funds posted the fourth worst quarterly performance in industry history in 3Q11. HFR attribute this to a combination of uncertainty regarding the European sovereign debt crisis and weakening economic data contributing to volatility across equity, credit, commodities and currencies.
These performance declines reduced total hedge fund industry capital by $85 billion, according to the HFR Global Hedge Fund Industry Report: 3Q11. The asset decline ends two consecutive quarters in which total capital under management reached new record levels, and brings total hedge fund industry AUM to $1.97 trillion. The HFRI Fund Weighted Composite Index declined by -6.2% for the quarter, wiping out a small 1H11 gain and bringing year to date performance for the broad based composite to a decline -5.4%.
Investors have continued to allocate new capital to the hedge fund industry, with 3Q net inflows totalling $8.7 billion. This brings the YTD inflow total to $70.1 billion. Investors have allocated $8.5 billion of new capital to Relative Value Arbitrage funds, bringing YTD inflows in relative value to over $30 billion. Macro funds experienced a net outflow of $3 billion, despite posting a narrow performance gain of +0.6% in 3Q. However, Macro has been in favour with investors throughout 2011, with nearly $20 billion of inflows YTD.
In contrast, Equity Hedge funds, which comprise nearly thirty percent of all industry capital, experienced $2.7 billion in net inflows for the quarter, despite posting a performance decline of -10.4%. Credit-sensitive Event Driven (ED) funds, which declined by -7.3% in the quarter, experienced a net inflow of less than $500 million; ED funds have received less than $10 billion in new capital in the first three quarters of 2011, the lowest by strategy area.
In total, 61% of all hedge funds experienced outflows for the quarter, while 39% experienced inflows. Of these, approximately 20 funds experienced inflows of greater than $500 million in 3Q, while nearly 25 funds experienced outflows of greater than $500 million.
These performance declines reduced total hedge fund industry capital by $85 billion, according to the HFR Global Hedge Fund Industry Report: 3Q11. The asset decline ends two consecutive quarters in which total capital under management reached new record levels, and brings total hedge fund industry AUM to $1.97 trillion. The HFRI Fund Weighted Composite Index declined by -6.2% for the quarter, wiping out a small 1H11 gain and bringing year to date performance for the broad based composite to a decline -5.4%.
Investors have continued to allocate new capital to the hedge fund industry, with 3Q net inflows totalling $8.7 billion. This brings the YTD inflow total to $70.1 billion. Investors have allocated $8.5 billion of new capital to Relative Value Arbitrage funds, bringing YTD inflows in relative value to over $30 billion. Macro funds experienced a net outflow of $3 billion, despite posting a narrow performance gain of +0.6% in 3Q. However, Macro has been in favour with investors throughout 2011, with nearly $20 billion of inflows YTD.
In contrast, Equity Hedge funds, which comprise nearly thirty percent of all industry capital, experienced $2.7 billion in net inflows for the quarter, despite posting a performance decline of -10.4%. Credit-sensitive Event Driven (ED) funds, which declined by -7.3% in the quarter, experienced a net inflow of less than $500 million; ED funds have received less than $10 billion in new capital in the first three quarters of 2011, the lowest by strategy area.
“The third quarter presented an extremely challenging performance environment, with asset volatility in many respects on par with financial crises in 2008 and 1998,” said Kenneth J. Heinz, President of HFR. “However, as investor risk aversion increased across all asset classes, hedge fund investors have maintained a critical but forward-looking disposition, reinforcing their commitments to preferred strategy areas and core funds, and positioning their allocations to benefit from opportunities created by current dislocations and volatility.”
In total, 61% of all hedge funds experienced outflows for the quarter, while 39% experienced inflows. Of these, approximately 20 funds experienced inflows of greater than $500 million in 3Q, while nearly 25 funds experienced outflows of greater than $500 million.
