Investors Added An Estimate Of $5.85 Billion Into Hedge Funds In July, But Wide Dispersion Continues

Article by eVestment

Investors returned to the hedge fund industry with net positive flows to start the second half of the year. So, all is well, right? Unfortunately, no. A well-below average proportion of funds have received inflows for a second consecutive month, and the most favored strategy of the first half of the year, macro, produced asset-weighted losses in-line with above average losses seen in February, which sets up a testy second half of 2018.

There are positives, however. Investors returned to equity strategies, with a heavy preference for market neutral, quantitative and sector-focused approaches. Commodity strategies are quietly getting new allocations, and even within emerging markets, where returns are falling precipitously with every rate hike and tariff tweet, certain managers are receiving new allocations as apparent awards for producing positive returns while their markets fall.

Highlights

Hedge fund flows returned to positive in July as investors added an estimated $5.85 billion.

Macro funds faced elevated redemption in July, and recent returns set up a difficult second half of the year.

Managed futures flows were negative for a fifth consecutive month, though the pace slowed significantly.

Emerging market fund redemptions continue, but allocations are available to those who can outperform.

Allocations Return to (Some) Hedge Funds to Begin H2 2018, Equity Markets Targeted

Investors added an estimated $5.85 billion into hedge funds in July bringing YTD net flows for the industry to $11.63 billon. Total estimated hedge fund assets are now $3.307 trillion.