After four years of favouring credit strategies, investors have preferred equity strategies for the past four months. Investors poured $13.8bn into equity strategies in January, the largest allocation since August 2009. In contrast, they redeemed an estimated $7.3bn from credit strategies in January, the largest monthly redemption since September 2011.
Overall hedge fund assets declined in January to $2.845tr. Slightly positive investor flows were offset by performance losses as assets under management declined by $7.9bn.
Macro and managed futures funds were the weakest strategies in January, where poor performance and redemption pressures contributed to declining assets under management. In contrast, event driven strategies had their largest monthly inflows in three years, taking over $3bn in new capital. Investors continued to drive money away from mortgage-backed securities strategies during the month, in spite of stronger performance.
Commodities continued to be weak, in spite of some improvement in the performance of commodities since the start of the year. Commodities strategies lost $1.18bn in assets under management over the month.
Joachim Klement, chief investment officer at Wellershoff & Partners, says: “This appears to be a bear market rally in commodities. In gold and precious metals, markets are recovering slowly and may be stable for the next couple of months, but I am not confident they will be higher in 6-12 months’ time. For gold to pick up, we would expect an uptick in inflation expectations and declining real interest rates, but current inflation expectations look well-anchored for this year. Commodities may improve in 1-2 years when there is more demand for real assets.”