By Hedge Fund Insight staff
Earlier it was noted here that European and Asian hedge funds were starting to attract capital flows. American institutional investors are the source of roughly 60% of the flows to the industry, and this year they have diversified from their existing holdings of hedge funds. That trend has continued into the middle of the year, according to Eurekahedge data shown below.
Hedge Fund Flows by Geographical Mandate (Year to Date) to End July
source: Eurekahedge
Not that American hedge funds are not getting flows – they are to the tune of over $40bn this year. But flows to other regions are disproportionately bigger. Over the last 8 months investors have committed $20bn of new capital to European hedge funds, and on a consistent basis too, as there have been net capital subscriptions in each of those months. In July European hedge funds took two-thirds of the positive capital flows of the industry, making European Long/Short funds the flavour of the month. Asian hedge funds have done similarly disproportionately well for flows this year.
Despite Japanese hedge funds outperforming the Nikkei 225 for the third consecutive month in July, and gaining 18.43% YTD, they have had net redemptions of capital this year. Japanese equity long/short funds have suffered from a disbelief amongst active allocators between hedge fund strategies that their version of QE will power equity markets upwards on a multi-year basis. It did in the West, but the rule of the Japanese exception seems to have been applied by gaijin allocators.
A similar disbelief operates in investors’ attitudes to event driven hedge funds. Event driven funds were up 9% last year and up just short of 5% this year. Japanese event driven funds are up over 20% so far in 2013. In the first half of the year there was a rising risk appetite amongst investors, and deal flow has been at a good level, but despite subscribing a couple of billion dollars to the strategy in July, investors in hedge funds have redeemed capital from event driven hedge funds this year.
Hedge Fund Flows by Investment Strategy (Year to Date) to End July
source: Eurekahedge
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