Hedge funds took in $6.1 billion in net new flows in August, marking the seventh month of inflows since January, according to BarclayHedge and TrimTabs Investment Research. For the first eight months of the year, hedge funds have seen $51 billion in inflows.
“Recent inflows might owe in part to excellent relative performance,” said Sol Waksman, founder and president of BarclayHedge. “While the S&P 500 plunged 10.6% in the four months ended August, the Barclay Hedge Fund Index decreased only 5.6%. Additionally, our preliminary data for September reveals that hedge funds outperformed the S&P 500 by more than a 2:1 margin again last month.”
The most popular hedge fund strategy of 2011 is fixed income hedge funds, taking in $14.6 billion so far this year. And in 13 of the past 14 months, fixed income hedge funds have seen inflows. Not surprisingly, this is the best-performing hedge fund category of 2011, rising 3.6% in the first eight months of the year.
“Prices have been soaring in many segments of the fixed income space,” noted Leon Mirochnik, a research analyst at TrimTabs. TIPS ETFs are up 10.4% and muni ETFs are up 7.0% year-to-date, Mirochnik noted.
The survey also shows that hedge fund managers are bullish on 10-year Treasuries, with 23% bullish on the notes, up from 15% in August. Bearish sentiment fell to 16% in September, from 32% the month prior.
And a full 57% are bearish on U.S. equities, up from 42%. Only 16% are bullish on U.S. equities, down from 27%. Additionally, 59% are bullish on the U.S. Dollar Index, compared to 9% who are bears on the index.
“Hedge fund managers have zero interest in risk at present,” Mirochnik said. “They are clinging to the safety of Treasuries and the greenback and stiff-arming stocks. Nevertheless, hedge fund investors are forking over fresh cash, and managers must put it to work. This money could support equities in the final quarter of 2011, especially if hedge fund managers lever up in an attempt to end the year with a bang.”
