Hedge fund inflows remained strong during the first half of 2012 — a net $20 billion — despite hedge fund returns that trailed those of major equity indexes.
Hedge funds received net inflows of $16.3 billion in the first quarter and $4.3 billion in the second quarter, pushing total industry assets to $2.1 trillion as of June 30, down from the record level of $2.13 trillion set on March 31, according to Hedge Fund Research's latest industry performance and fund flows report.
Investors continued to favor the largest hedge fund managers, allocating a total of $11 billion in the second quarter to managers with more than $5 billion, while redeeming an aggregate $6.9 billion from managers with less than $5 billion in their coffers, said HFR's report.
About 30% of all hedge funds experienced net inflows totaling $43.3 billion in the second quarter; 70% suffered net outflows adding up to $39.2 billion,
First-half 2012 net inflows topped $8.5 billion in the second half of 2011, but were about one-third of the $62 billion in the first half of 2011, HFR reported.
Returns of major hedge fund indexes were universally positive in the first half, led by the 2.52% return of eVestment/HFN Hedge Fund Aggregate index. Greenwich Global Hedge Fund index followed, at 2.71%; Barclay Hedge Fund index, 2.39%; Dow Jones Credit Suisse Hedge Fund index, 2.2%; Hennessee Hedge Fund index, 2.1%; HFRI Fund Weighted Composite index, 1.87%; Morningstar MSCI Composite Hedge Fund index, 1.6%; Eurekahedge Hedge Fund index, 1.4%; and Lyxor Hedge Fund index, 0.49%.
Hedge funds of funds also produced positive returns in the six months ended June 30, with the HFRI Fund of Funds Composite index at 1.09% and the Edhec Funds of Funds index at 0.8%.
Equity market index returns for the first half of 2012 were 9.49% for the S&P 500; 9.31% for the Russell 3000; and 6% for the MSCI All Country World. The Barclays U.S. Aggregate Total Return index trailed the equity indexes with a 2.37% return for the period.