Investors Pull $1.1 Billion From Hedge Funds

Jul 17 2008 | 9:11am ET

Hedge funds suffered through their worst-ever first half this year, so it’s not too surprising that investors headed for the door.

Investors pulled some $1.1 billion from the industry during the year’s first five months, according to Morningstar.

Equity strategies, among the hardest-hit in terms of returns, were hit with $14.6 billion in outflows through May.

On the other hand, global trend hedge funds added $6 billion and global non-trend funds $2.4 billion, Morningstar reports.

“Volatility returned to levels not seen since March amid fears of recession and rising inflation,” Nadia van Dalen, a Morningstar analyst, said. “Most hedge funds are not immune to these economic shocks, despite what their name might imply.”

Separately, International Financial Services London reports that last year were better times, as industry assets rose 30% to £1.1 trillion (US$2.2 trillion). Still, there were ominous signs even amid that good news: The IFSL report said most of the growth took place during the first three quarters of 2007, with inflows slowing in the fourth quarter.

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