Hedge fund withdrawals jump to highest since '09-data

Date: Wednesday, July 11, 2012
Author: Laurence Fletcher, Reuters

Hedge fund outflows surged to their highest level in almost three years this month, data from hedge fund administrator GlobeOp shows, in a sign investors may be losing faith in the sector after mixed performance amid choppy markets.

Net outflows from hedge funds, as measured by the GlobeOp Capital Movement Index, which tracks monthly net subscriptions to and redemptions from funds managing around $187 billion in assets, were 1.17 percent of that total during the month to July 1.

The withdrawals compare with net inflows in each of the previous five months and were the highest level of net outflows since October 2009, when clients pulled out 3.76 percent.

The withdrawals may be an early indicator that investors, who have continued to pile into the $2 trillion hedge fund industry in recent years on hopes it can help them survive choppy markets, are reconsidering their options.

Hedge funds lost an average 5.3 percent last year, according to Hedge Fund Research (HFR), after the crisis in the euro zone and worries of a global recession rattled investors and punished all but the most bearish of strategies.

After achieving its best first-quarter performance since 2006 this year, the hedge fund industry lost some ground in April and May, and the average fund is now up 1.7 percent in the first six months of 2012.

While July's figure is affected by mid-year redemptions, as investors rebalance their portfolios, the outflows nevertheless exceeded withdrawals of 0.11 percent seen a year ago and net inflows of 1.17 percent two years ago.

"The outflows are perfectly normal for a June quarter end. The inflows are a little bit lighter than expected but I wouldn't read too much into one month's figures," Vernon Barback, president and chief operating officer, GlobeOp.