Hedge Fund Inflows Slow in August

Oct 3 2007 | 7:42am ET

All hedge funds, with an estimated $1.9 trillion in assets, posted an inflow of $8.9 billion in August, according to figured released today by TrimTabs Investment Research and BarclayHedge. The August inflow was less than a quarter of the $39.1 billion inflow in July, the lowest since January’s $7 billion inflow.

Last month TrimTabs mistakenly reported that there was a $32 billion outflow in July, instead of the $39.1 billion inflow. The company apologized for the error today in a press release.

“We apologize for the incorrect hedge fund flow estimates for July,” said TrimTabs CEO Charles Biderman.  “The monthly hedge fund flow data is a new service and the changes we made to our methodology will ensure that our current and future estimates are as accurate as possible.”
Breaking out the estimated $8.9 billion inflow in August, funds of funds added an estimated $24.5 billion, the third-highest inflow of 2007, while direct investors (those not investing through a fund of funds) pulled out an estimated $15.6 billion, the second-highest outflow since 2005, TrimTabs said. 
“Many investors were probably nervous about putting fresh cash to work until they could assess the fallout from the sub-prime mortgage mess,” said Conrad Gann, TrimTabs president.
“Given the turmoil in the credit markets, it is not surprising that fixed income hedge funds posted the biggest outflow, losing an estimated $1.7 billion,” added Gann.  The most popular hedge fund category was multi-strategy, which received an estimated $6.2 billion.
According to TrimTabs, the estimates for July hedge fund flows were incorrect for two reasons.  First, adjustments were not made for the reporting of funds of funds, which tend to report flows with a significant lag because they consolidate the returns of their portfolio companies.  Second, funds were included in the survey that updated their performance but not their assets under management.  As a result, those funds that posted positive returns were incorrectly reported as posting outflows equal to their asset growth from performance.
The TrimTabs report provides updated information on more than 5,500 hedge funds, and Sol Waksman, president of BarclayHedge, said it reveals for the first time the enormous effects of hedge fund activity on the markets and the economy.

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