Signs of risk aversion of global investors is decreasing. This is getting more evident, with emerging markets reaping the benefit of the situation. Recent data from global fund-flow tracking agencies indicate that hedge funds have seen positive inflows for the first time after four consecutive quarters and emerging market funds, both bond and equity, have seen strong inflows.
According to recent data released by Hedge Fund Research (HFR), the hedge funds pulled in $1.1 billion during the third quarter, marking the that first time investors added money after a full year of heavy outflows. In the previous four consecutive quarters, clients pulled out $330 billion from these loosely regulated funds. Hedge funds now manage $1.5 trillion, HFR said, far off the $1.9 trillion they managed at the end of 2007.
On the fund flow side, money kept flowing out of the money market and even US equity funds during the second week of October, with emerging markets equity and bond funds the main beneficiaries, says the latest report by EPFR Global which tracks fund flows across markets.
?Flows into the former hit a year-to-date high, with the diversified global emerging markets (GEM) equity funds accounting for over half the net inflows, while the $967 million absorbed by emerging markets bond bunds was the biggest weekly total since EPFR Global started tracking this data from 2001,? says the report.
?The most recent data suggest that the sentiment of hedge fund investors has improved from historical lows, but investors remain selective about fund strategy and exposure characteristics,? said Kenneth Heinz, president, HFR.
On the hedge fund side, the $1.1 billion increase could suggest that investors like pension funds and endowments are slowly returning to these riskier assets one year after the industry delivered its worst-ever returns. Nearly two-thirds of the hedge funds surveyed by HFR reported taking in a total of $38 billion in new assets in the quarter. Other hedge funds saw $37 billion leave through redemptions.