Equity hedge fund inflows push industry assets to five-year high
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Equity hedge fund inflows push industry assets to five-year high 19 December 2013New York Reporter: Daniel Jackson
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Hedge fund assets under management have reached a 5-year high, according to a report by eVestment.
The institutional investment research firm found that hedge funds are on track for assets to rise $256 billion in 2013, an 80 percent increase over the rise seen in 2012.
Investor flows into hedge funds were positive for a fifth consecutive month in November, and new allocations of $15.3 billion brought the five-month total of inflows to $68.5 billion.
Industry assets hit a five-year high in November of $2.84 trillion, and are now just 3 percent below figures last seen before the 2008 financial crisis.
Total industry assets are on pace to increase by an estimated $256 billion for 2013, an amount nearly 80 percent greater than 2012’s $144 billion increase.
Equity strategies took in the majority of new assets in November as investor preferences for alternative exposure to current equity markets has become clear. Allocations to long/short equity funds in November were the largest in more than 50 months, since August 2009.
The turnaround of investor interest towards equity exposure has been significant, and appears to be at the expense of credit exposure. In the months 38 from May 2010 to June 2013, investor flows to equity outpaced credit only four times. In the five months since the end-of-taper alarm and ensuing US treasury rate spike, monthly equity flows have outpaced credit three times.
Credit strategy assets rose in November, a reversal of October’s redemptions, but at a muted pace. Investors allocated $3.5 billion into the space during the month, meaningfully below their prior 12-month average inflow of $7.1 billion.
Macro and managed futures fund flows were both negative in November. Redemptions from macro strategies reversed a recent string of new allocations. Flows were mixed for the largest macro funds and investors appear to be aligning new allocations with those funds able to perform well in the recent global environment.
Emerging market hedge fund flows were positive again in November, the sixth month of positive flows in the last seven. When compared to institutional traditional long-only emerging market flows, eVestment reports a diverging trend.
Long-only EM allocations had been firmly positive dating back to 2009, however flows turned negative in Q3 2013. Conversely, EM hedge fund flows had been negative from early 2010 until Q2 2013. It is an important market sentiment indicator when institutional investors opt for hedged over long-only exposure to developed and emerging markets.
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