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Hedge Fund Flows Narrowly Positive In Q3 - Hedge Fund Research

Wendy Spires Deputy Editor November 18, 2009

Hedge Fund Flows Narrowly Positive In Q3 - Hedge Fund Research

After a sustained period of gloom the outlook for the global hedge fund industry would appear to be brightening, with capital inflows narrowly positive for the third quarter, according to the latest figures from Chicago-based Hedge Fund Research.

After four consecutive quarters of net withdrawals investors seem to be losing their aversion to hedge funds, with these investment pools attracting $1.1 billion in new capital in the three months to the end of September. Withdrawals are however still a running theme, as although over two-thirds of hedge funds recorded net inflows – accounting for $38 billion in new assets – these gains were largely offset by some $37 billion in outflows from redemptions and fund liquidations.

Prior to the third quarter the hedge fund industry experienced a year-long period of investors running for the exits, seeing withdrawals amounting to $330 billion. But in contrast to the outflows of the first half of this year HFR notes that in the third quarter withdrawals were concentrated in specific strategies. Relative value arbitrage and event driven funds saw total net redemptions of over $5.7 billion over the third quarter, while in contrast equity hedge and macro strategies attracted in excess of $6.8 billion in net new capital.

Funds of hedge funds would also appear to be turning a corner, as although investors continued to withdraw assets during the third quarter redemptions slowed to $3.2 billion while in the preceding four quarters withdrawals totalled over $180 billion.

For the hedge fund industry as a whole performance was also encouraging in Q3, with the HFRI Fund Weighted Composite Index climbing 6.9 per cent over the third quarter bringing returns for the first nine months of the year to 17.1 per cent. On the back of these performance gains total hedge fund industry assets rose from $1.43 trillion at the end of the second quarter to $1.53 trillion at the end of the third.

Singled out by HFR for their strong performance in the first three quarters of the year were relative value, event driven and equity hedge strategies, each of which were up over 20 per cent as at the end of September. By way of contrast HFR’s short bias index was down 18.56 per cent over the same nine-month period.

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