According to HedgeFund.net, performance accounted for a net increase of $37.15 billion and investor allocations accounted for an additional $26.03 billion. The report noted that the core rate of growth (asset rise due to investor allocations) increased in November to 1.32%, which it said was above average during the industry’s seven month positive allocation streak.
The report noted that net investor outflows due to the financial crisis ended in April 2009, and that in the intervening seven months, investor allocations have added an estimated $119.54 billion to total asset growth. Total industry assets are roughly $900 billion below the peak set in the second quarter of 2008.
Funds with greater than $500 million, which manage an estimated 54% of all hedge fund assets, took in 60% of the net new allocations in November. The biggest funds – those with greater than $1 billion, which manage an estimated 38% of the industry – took in 40% of new allocations in November. These largest funds also generated 42% of November’s increase in assets due to performance, according to the report.
Sub-sector Specific Flows
The report notes that managers investing in European markets had the highest rate of inflows in November for the second month in a row. U.S. focused managers suffered a net outflow for the second month running.
By primary asset class, fixed income allocations outpaced those to equity managers and allocations to commodity focused funds were slightly below average, according to HedgeFund.net. Fixed income arbitrage strategies had the highest rate of core growth in November followed by emerging markets and L/S Equity, though CTA/managed futures flows remained sluggish and distressed fund flows were below average for a second straight month.
The report said that a broad underperformance of hedge funds in November could be the result of recent inflows, noting that over the past three months the industry has taken in an estimated $51 billion in new allocations. “Putting that amount of capital to work towards the end of a year when performance is up and performance based fees are on the horizon is a daunting task,” noted the report, which also said that since managers are not paid to manage cash accounts, “…the influence of the hedge fund industry should continue to be felt early in 2010”.
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