Hedge funds are having their best year in a decade, according to this week’s hedge fund report by Bank of America/Merrill Lynch.

Hedge funds are up 14% YTD, having made gains for seven straight months. Analysts at BofA/Merrill Lynch also expect to see total assets under management in the industry to rise back up to $1.4 trillion by year's end, which is where they stood one year ago.

According to TrimTabs Investment Research, the hedge fund industry saw a net inflow of $18 billion in August, which is the highest monthly flow since May 2008. Meanwhile, fund of hedge fund redemptions have also shrunk, which has eased pressure on hedge funds, according to the report.

“We now estimate that hedge funds are likely to have seen an inflow of $15-20 billion in 3Q09, and expect a further $30-40 billion in 4Q09,” states the report, which is available below. 

The report also shows that larger funds have outperformed smaller funds so far this year, which flies in the face of common thinking that small hedge fund usually outperform big ones. 

BofA, Merrill Lynch Hedge Fund Monitor Oct. 12, 2009

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