HFN: Hedge Fund Assets Reach $2.6 Trillion

Aug 21 2007 | 10:13am ET

Total hedge fund assets climbed steadily in the second quarter despite correction in the credit market.

Hedge fund assets increased by 8% in the second quarter to $2.6 trillion, from $2.4 trillion at the end of March, according to the latest figures from the HFN Hedge Fund Industry Asset Flow Report.

New asset inflows accounted for some $107.3 billion in the second quarter while performance gains comprised an additional $89.6 billion, the second largest gains on record.

According to HFN, long/short equity assets increased by 7.7% to $766.5 billion. In the first half of 2007 long/short equity funds attracted $48 billion in new allocations. On the contrary, the growth for fixed- income focused hedge funds slowed in the second quarter as liquidations increased and performance lagged.

After increasing by the fastest rate on record in the first three months of 2007, total asset growth in fixed-income hedge funds slowed to 5.5%, with assets reaching $468.5 billion including 23.2 billion in new allocations in the second quarter. As a result of losses stemming from the sub-prime debacle, fixed income funds experienced near-record liquidations of $3.9 billion in the quarter, while performance gains added $5.4 billion, its smallest quarterly contribution to asset growth since 2005.

Other hedge fund strategies experiencing growth last quarter include emerging hedge market funds, which attracted $279.3 billion, including
$20.9 billion in new allocations, global macro funds ($131.8 billion), multi-strategy funds ($22.8 billion), and distressed funds ($9.5 billion).

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