Hedge funds posted an estimated outflow of USD3.8bn in December 2009, according to TrimTabs Investment Research and BarclayHedge. 

December’s outflow is the industry’s first since July 2009.

At the same time, hedge fund assets grew to a 12-month high of USD1.5trn thanks to an unprecedented ten-month winning streak.

“December’s relatively small outflow is almost certainly seasonal, a product of quarter-end and year-end redemptions,” says Sol Waksman, chief executive of BarclayHedge. “Hedge funds experienced outflows in December in each of the past five years, and we suspect inflows have already resumed.”

In addition, funds of hedge funds posted an estimated outflow of USD6.3bn in December, bringing redemptions for all of 2009 to USD180.9bn. Funds of funds returned only 10.24 per cent in 2009, less than half of the industry’s average 23.9 per cent gain.

“Funds of hedge funds turned extremely risk-averse after the late 2008 sell-off,” says Vincent Deluard, global equity strategist at TrimTabs. “Their conservative strategy allocation and large cash balances hurt their returns during this rebound.”

At the strategy level, convertible arbitrage and emerging markets funds showed the highest returns this past year, delivering gains of 53.59 per cent and 43.85 per cent, respectively. 

Inflows were strongest for commodity traded advisers and equity market neutral funds, the two strategies which performed best during the late 2008 sell-off. 

Deluard adds: “Funds with the highest fees experienced the smallest redemptions this past year. Hedge fund investors are still willing to pay for good managers; the funds with the highest fees also delivered the best returns, rising an average of 36.5 per cent this past year.”