The hedge fund industry posted an estimated outflow of $3.7bn or 0.2% of assets in June, following an inflow of $4.9bn in May and a $2.5bn outflow in April, according to data today from TrimTabs Investment Research and hedge funds data provider BarclayHedge. The industry posted negative returns of 1.1% in June, continuing the negative returns of 3.2% in May. It marks the first two-month losing period in 16 months, since January and February of 2009. Around this time last year, hedge fund trade groups predicted a rise in the industry's involvement with distressed properties, however this prediction is not materializing at the levels originally thought. "Redemptions probably persisted through July, and they could pepper the remainder of the year," said BarclayHedge CEO Sol Waksman. "Even if performance hadn't been poor in May and June, July is historically one of the worst months of the year for fund subscriptions, and seasonality will be working against inflows through December." The Trim Tabs/BarclayHedge survey of hedge fund managers found that, of 99 respondents, 34% indicated in July they are "bullish" on the S&P 500, up sharply from 19% in June. Only 22% are bullish on the US dollar, down from 36% in June. One-quarter of hedge fund managers gauge the odds of a double-dip recession at greater than two in three, while inflation expectations are balanced: "Indecision about the economic future might explain the somewhat contradictory strength in metals and US debt," said TrimTabs executive vice president Vincent Deluard. "Many managers are 'unusually uncertain' about the inflation outlook, so they seem to be covering their bases with both gold—in case inflation accelerates—and long-term Treasuries—on deflation thinking." Investors are concerned on the possibility of inflation or deflation risks, although which way the economy turns will be the result of policy response, according to separate research notes recently. The US,  like some European countries, is showing a high ratio of debt to gross domestic product (GDP). And, unlike some EU countries linked to the euro, the US could potentially "inflate away the real value of that debt," according to economic commentary last week. The yield on 5-year US Treasury inflation-protected securities (TIPS) recently slipped into negative territory. Although there's no reason why the yield on 5-year TIPS could not fall further, economists anticipate a larger risk of it rising sharply on possible deflation. Write to Diana Golobay.