September Hedge Fund Inflows Slow

Nov 6 2007 | 2:54pm ET

Investors spooked by the subprime mess and hedge fund meltdowns showed their disdain for the industry last month. According to TrimTabs Investment Research and BarclayHedge, hedge funds posted an estimated inflow of $18.6 billion in September, which is the third-lowest inflow of 2007.
“The credit crunch and well-publicized meltdowns at several hedge funds seem to have made investors more wary of hedge funds,” said TrimTabs Chief Executive Officer Charles Biderman. He added that the September inflow into hedge funds “was equal to only half of the average monthly inflow of $34 billion from January through July.”
Of the estimated $18.6 billion inflow, $357 million went into funds of hedge funds, while direct investments into hedge funds were an estimated $18.2 billion.

Investors gravitated toward emerging markets hedge funds, lavishing that group with $11.4 billion, or 61%, of the total inflow. Conversely, equity market neutral shops saw an estimated outflow of $3.5 billion. 

“As usual, flows followed performance,” said Biderman. “The emerging markets category was the best performer in September, surging 5.7%, and its gain of 14.3% in the first three quarters of 2007 was the second-highest of all hedge fund categories.”
But don’t be fooled by the apparent slowdown of inflows into hedge funds. For the first nine months of the year, hedge funds gained assets of an estimated $237 billion, which is more than double the $100 billion invested in U.S.-listed equity mutual funds and more than triple the $73 billion invested in U.S.-listed equity ETFs.



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