Hedge fund flows in June went negative for the first time in 2013 as hedge fund investors redeemed $8.6 billion, the largest outflow since October 2012 when outflows totaled $10.3 billion, BarclayHedge and TrimTabs Investment Research reported Wednesday.

June’s 1.3% loss signaled a sharp turnaround from $18.8 billion in inflows in May.  The net $8.6 billion loss, or 0.4% of assets, was calculated according to estimates based on data from 3,369 funds. The hedge fund industry’s assets dipped to $1.93 trillion in June, with the 1.3% loss its worst showing since May 2012.

The loss occurred at the same time that ETF and mutual equity fund inflows hit a record in July, which is generally a contrarian bearish indicator for hedge funds.

Fixed income funds lost 1.1% in June, breaking an 18-month streak of gains stretching to December 2011, and equity long-only funds lost 1.4%, The TrimTabs/BarclayHedge Hedge Fund Flow Report noted.  Funds of hedge funds shed $1.5 billion, or 0.3% of assets, in June, reversing a $428 million inflow in May. Funds of funds have attracted net inflows in just three of the past 24 months. 

“Despite the June setback, year-to-date flows to the hedge fund industry stayed positive at $27.1 billion,” said Sol Waksman, president and founder of BarclayHedge, in a statement.  “In the first five months of this year, the industry took in $35.7 billion, compared with just $484 million in the same period last year.”

The TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that managers grew “notably less bearish” on the U.S. stocks of the S&P 500 in July, but opinions were “pretty evenly split” between bullish or neutral on the market’s prospects for August.

The three most-watched hedge funds performed as follow, according to the report:

  • Fixed income funds lost 1.1% in June, reversing a 0.9% gain in May and breaking an 18-month streak of gains stretching to December 2011. Fixed income funds underperformed the iShares 1-3 Year Treasury Bond ETF (SHY), which lost 0.07% in June.
  • Equity long only funds lost 1.4% in June, adding to a 0.6% loss in May but slightly outperforming the benchmark Russell 3000 Index, which lost 1.3% in June.
  • Equity long bias funds lost 0.9% in June, reversing a 2.6% gain in May and marking the first negative month since losing 0.4% in October 2012.

Read Signs of ‘Great Rotation’ as Inflows Hit Record for U.S. Equity Funds at ThinkAdvisor.