Tremont Capital Management released figures this week showing a $4.3 billion net outflow from hedge funds for the fourth quarter 2005. Despite the net effect, some positive components existed, with global macro and emerging markets investment strategies drawing substantial amounts of investment. Overall, the asset flow report showed that the global macro, emerging markets and dedicated short bias strategies saw inflows of $1.2 billion, $600 million and $30 million, respectively.
Robert Schulman, chief executive officer of Tremont, is not worried about the fourth quarter net outflows, believing they reflect a relatively consistent pattern of annual rebalancing in hedge fund portfolios. He said that in many instances in the last quarter of the year, withdrawals correspond to subscriptions in other strategies or funds.
"When you look at fourth quarter results for each of the last 12 years," said Schulman, "11 of those quarters were followed by larger flows in the following first quarter. This is characteristic in the hedge fund industry where, in the rebalancing process of redemptions and subscriptions, the subscription component is not reported until the first day of the following quarter."