Introduction
Hedge funds posted an average return of -0.2%1 in December, outperforming global equity markets by 0.2% as managers focused on protecting their capital through yet another month of high volatility in the underlying markets. The MSCI World Index fell by 0.4% during the month, closing the year down by 9.9%. Managers lost US$6.61 billion during the month, mainly through net outflows as investors looking to rebalance their portfolios for the next year withdrew their capital. December marked the fifth consecutive month of negative net flows – total hedge fund assets have fallen to US$1.71 trillion over the last five months of the year.
Highlights of hedge fund performance and asset flows for the month are as follows:
| December 2011 | US$ billion |
|---|---|
| Allocation (Inflows) | 11.52 |
| Redemption (Outflows) | -18.54 |
| Net Asset Flows | -7.02 |
| Positive Performance (Growth) | 10.49 |
| Negative Performance (Decline) | -10.08 |
| Total | 0.41 |
| Overall Total | -6.61 |
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