Hedge Funds Pull in $6.1 Billion in August, Seventh Inflow in Eight Months

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Fixed Income Hedge Funds Boast Best Returns and Heaviest Inflows.

Hedge Fund Managers Extremely Bearish on S&P 500 and Very Bullish on U.S. Dollar Index. Managers Shift to Bullish from Bearish on 10-Year Treasury.

Hedge funds pulled in $6.1 billion in August, the seventh inflow in eight months, report BarclayHedge and TrimTabs Investment Research. Hedge funds hauled in a heavy $51.0 billion in the first eight months of 2011.

“Recent inflows might owe in part to excellent relative performance,” says 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.”

Fixed income hedge funds are wildly popular. These funds posted an inflow in 13 of the past 14 months and have raked in $14.6 billion in 2011, the heaviest inflow of all hedge fund strategies. Fixed income hedge funds have also returned 3.6% in 2011, the best performance of all strategies.

“Prices have been soaring in many segments of the fixed income space,” notes Leon Mirochnik, Associate Portfolio Manager at TrimTabs. “The flow data we track daily shows that TIPS ETFs sport a handsome year-to-date return of 10.4%. Even lowly muni ETFs, which are up 7.0% in 2011, have crushed stocks. Additionally, the yield on the 10-year Treasury recently plunged to 1.72%, the lowest level on record, from 3.75% in February.”

The latest TrimTabs/BarclayHedge Survey of Hedge Fund Managers shows that managers have reversed their stance on long-dated Treasuries. Bullish sentiment on the 10-year note rose to 23% in September from 15% in August, while bearish sentiment sank to 16% from 32%. Meanwhile, managers are extremely sour on domestic equities. Bearish sentiment on the S&P 500 soared to 57% from 42%, while bullish sentiment plunged to 16% from 27%. Additionally, managers are very upbeat on the U.S. Dollar Index (59% bulls against 9% bears).



“Hedge fund managers have zero interest in risk at present,” notes Mirochnik. “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.”

The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies. Click here for further information.