Yahoo Finance Hedge Funds See Record High Assets, Value Investing Beats Growth
- By Holly LaFon
For the first time in years, value-oriented hedge funds are notching results higher than those of growth funds. As return results for 2016 roll in, several prominent funds have reported market-beating gains, but data from Hedge Fund Research Institute on Tuesday confirms that funds categorized as "value" beat those focused on "growth" on 12-month, three-year and four-year annual bases.
In the category of equity hedge funds, the HFRX EH: Fundamental Value Index returned 0.85% in December, 3.64% in the past 12 months, 0.42% in the past three years and 4.12% in the past four years. The HFRX EH: Fundamental Growth Index declined 1.12%, 6.55%, 1.88% and 0.4% for the same periods.
The Fundamental Value Index also exceeded the general HFRX Global Hedge Fund Index in all periods except for December. It returned 0.86% for the month, 2.50% in the past 12 months, lost 0.6% in the past three years and gained 2.46% in the past four years.
A screen shows that the hedge funds tracked by GuruFocus have the greatest consensus on Alphabet (GOOG), Alphabet (GOOGL) Bank of America (BAC), Apple (AAPL) and Facebook (FB), whose value status would be arguable by different managers. Each of the stocks appreciated by double digits over the past year.
The gains come against a 20.5% rise in the S&P 500, though, that extended the five-year market rally of 72%.
Despite reports of clients fleeing hedge funds due to lackluster returns, HFR released another study Friday saying that total assets under management in the industry rose above $3 trillion for the first time. Total capital increased by $46.8 billion in the fourth quarter, to $3.02 billion at the end of the year. It was the second consecutive quarter of record assets for hedge funds.
The industry still faces investor withdrawals, as clients pulled $71.1 billion, or 2.4% of assets, from the industry in 2016, the second largest outflow since 2009, when they took back $131 billion. Client redemptions totaled $18.7 billion in the fourth quarter, or 0.63% of industry assets, compared to an outflow of $28.2 billion in the third quarter, the report said.
In the largest strategy in the industry, equity hedge, capital ballooned to $7.5 billion in the fourth quarter and $20 billion for the year, for a record of $849 billion. The index tracking the strategy also increased by 5.5% compared to the previous year, driven by energy/basic materials and fundamental value funds.
But the category also saw the fundamental value portion lead outflows, with $17 billion gone, followed by fundamental growth strategies, which lost $11 billion, as the total declined $6 billion. Investors redirected to other strategies within equity hedge funds, with quantitative directional seeing $4.7 billion and equity market neutral $3.9 billion in inflows.
This article first appeared on GuruFocus.
