Hedge Fund Inflows Increase 54% In ‘07

Jan 15 2008 | 4:14pm ET

Hedge funds set yet another record for inflows last year, as the industry added $194.5 billion in new capital, Hedge Fund Research said. The inflow represents a 54% increase from 2006, when the industry attracted $126.5 billion.

Hedge funds now manage some $1.87 trillion, HFR said.

But for the third straight year, investors soured somewhat on hedge funds in the fourth quarter. Less than 16% of 2007’s new money, or $30.4 billion, flowed into hedge funds during the last three months of the year.

“It was another record year for hedge fund when it came to attracting new assets in spite of the slower pace in the fourth quarter,” Kenneth Heinz, HFR president, said. “The trend in strategy allocations suggests investors are not chasing the best performers, and are anticipating continued opportunities in arbitrage and event-driven.”

Indeed, relative-value arbitrage added $45.9 billion in new assets last year, the most of any strategy. Event-driven funds came in second, adding $41.5 billion in 2007—but just $14 million last quarter.

Funds of hedge funds now manage $798.6 billion, adding $59.2 billion last year. Last year, funds of hedge funds added $49.7 billion.


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