In 12 months to November 2012, hedge funds shrink and underperform S&P 500 by more than half
The global hedge fund industry grew by a net 0.3 percent in November in terms of assets, following a contraction in October, as investments seen as involving higher risk boosted the funds’ profitability, according to a study by fund analysis firm BarclayHedge and research company TrimTabs.
The hedge fund industry took in a net $4.7 bn in November, after a net outflow of $10.3 bn the previous month, as emerging markets and distressed securities investments increased profits for higher-risk investment strategies, according to the study, which tracks data from 2,935 hedge funds. Hedge funds also doubled the performance of the S&P 500 in November, rising 0.6 percent compared with the index’s 0.3 percent gain.
‘Emerging markets and distressed securities funds show that riskier investments are generating higher returns for a change,’ says Charles Biderman, founder and CEO of TrimTabs, in a press statement. ‘For much of the past year, safer fixed-income hedge funds took in the most money by dollar volume and delivered the highest returns.’
Despite the strong performance in November, hedge funds suffered outflows and underperformed common benchmarks in the 12-month period to November 2012, notes the report. Hedge funds gained 6.2 percent in the 12-month period while the S&P 500 rose 13.6 percent. Outflows in the year ending November 2012 totaled $21.2 bn, meaning the industry shrank by about 1.2 percent in terms of assets in the year. The drop contrasts sharply with the net inflow of 61.9 percent in the previous 12-month period.
Hedge Fund Research (HFR), another industry analysis firm, reports that hedge fund indices continued growing in December, although the company doesn’t provide overall inflow or outflow figures for the year. HFR’s HFRI Fund Weighted Composite Index gained 1.3 percent in December, bringing gains for the full year to 6.2 percent.
‘With the conclusion of 2012, the hedge fund industry has evolved and advanced for four years since the financial crisis in December 2008, with powerful trends continuing to define and shape the significance and influence of the hedge fund industry on financial markets, asset pricing and investors in 2013,’ says Kenneth Heinz, president of HFR, in a statement.
‘The hedge fund industry is now larger, more sophisticated, more accessible, more global, more diversified, more transparent, more efficient and more capable of meeting the requirements of institutional and individual investors in 2013.’
