Despite a slight drop in assets last month, hedge funds are poised to pull in the billions this year, according to a new report.
Poor performance drained $3 billion from hedge funds in January, offset slightly by $140 million in net inflows, according to Eurekahedge. But the industry could grow by $200 billion by the end of the year following one of their strongest years in 2009.
“Going forward, we can expect greater allocations to hedge funds throughout the year 2010 as compared to 2009,” Eurekahedge said. “The sharp change in market conditions in the middle of January has resulted in greater risk aversion and as such, investors are seeking greater downturn protection, which hedge funds have traditionally provided in addition to greater returns over the long term.”
Hedge fund assets, which stood at $1.48 trillion at the end of last year, could rise to $1.68 trillion by the end of this one.
Investors are increasingly choosing single-manager hedge funds over funds of hedge funds, Eurekahedge said.
And while many in the industry are wringing their hands over proposed new hedge fund regulations on both sides of the Atlantic, the prospect of strict new rules for hedge funds is having a reassuring effect on hedge fund investors, especially institutional investors, according to Eurekahedge.