Hedge Fund Inflows Slow To A Trickle

Apr 21 2008 | 12:36pm ET

Fresh off of a year in which they poured record amounts of money into hedge funds, investors were a good deal more reticent about continuing to do so in the first quarter.

Hedge fund inflows during the first three months of 2008 totaled just $16.5 billion, according to Hedge Fund Research. The 0.38% increase in capital—the smallest increase since the second quarter of 2004—leaves the industry managing $1.875 trillion. The 0.87% capital flow is the smallest since the last quarter of 2005, when the industry experienced a net redemption.

The miniscule inflow also means that the hedge fund industry has a lot of work to do to top last year’s record inflow of $194 billion.

“The financial market volatility which characterized the second half of 2007 accelerated into Q1 2008, resulting in a broad dispersion among the returns posted by fund strategies,” Kenneth Heinz, HFR president, said. “In some cases, the performance differentiation has been extreme, ranging from liquidations to gains of hundreds of percent. Investors slowed allocation in total and re-allocated from arbitrage and the more volatile macro strategies into more diversified strategies and those designed to identify opportunities in a weak credit market.”

Among the winners in the reallocation game was equity hedge, which added $8.2 billion in new money, but still managed to see its total assets fall due to poor performance. Distressed and special situations added almost $8 billion, and relative value took in $6.5 billion. Merger arbitrage and macro funds, on the other hand, suffered redemptions of about $4 billion and $1 billion, respectively.


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of