As investors get their books in order to start the new year off right, many are making the move away from hedge funds data showed Wednesday.
“The GlobeOp (GO.L) Capital Movement Index, which tracks monthly net subscriptions to and redemptions from hedge funds managing around $170 billion (111 billion pounds) of assets, declined 0.88 points to 140.18 this month,” reports Reuters. “The index is clinging on above the 140-point mark it hit in December for the first time since October 2008, when Lehman’s demise sent markets across the world into a tailspin.” GlobeOp Chief Executive Hans Hufschmid said that “the decline to typical changes in investor strategy at the start of a new year and said historically the figures were encouraging.” Hufschmid explained that “January net capital flows were negative”, but that “not unexpected.” He continued to note that “January’s inflows were the highest in 12 months; outflows were the second lowest in seven years.”
Hedge funds “saw an exit of money in the month to Jan 1, with gross outflows rising to 4.84 percent, more than double the 1.92 percent rise a month earlier,” writes Reuters. In 2011, the average hedge fund dropped nearly 5%, with some funds, like John Paulson’s Advantage Plus fund, losing over 50%, so investors had more than enough reason to be hesitant to continue investment in the hedge fund industry, especially considering that there were management fees that investors had to pay in addition to accepting the poor returns. However, it seems that for as many investors took money out of hedge funds, there was also an increase in the volume of hedge fund inflows. “Gross inflows of money remained relatively robust, however, rising 3.96 percent, higher than the 3.52 percent a month earlier.”
Last year “was only the third calendar year since HFR began measuring industry-wide performance in 1990 that hedge funds finished in the red.”