2003 A Record Breaking Year For Hedge Fund Inflows

by Phillip Morton, Investors Offshore.com

24 February 2004

Revised figures from Tass Research have revealed that hedge funds grew at the double the rate in the fourth quarter of 2003 than was first anticipated.

The research unit of Tremont Capital Markets found that investors ploughed $26.8 billion into hedge funds at the back end of 2003, capping off a record year for inflows into alternative investment funds which increased by $72.2 billion over the year. By comparison, 2002 inflows totalled $16.3 billion whilst the previous record year in 2001 saw investors pour $32 billion into hedge funds.

"It was an extraordinary quarter and year for asset growth in the industry," noted Robert Schulman, Co-CEO of Tremont Capital Management. "Last year, numerous factors converged to create this environment. First, there was a desire by investors who had been on the sidelines to return to equity-based strategies and, secondly, there was a continued growing involvement by institutional investors around the globe. In addition, many new funds launched and attracted sizeable interest and capital."

According to Tass the most popular hedge fund strategy in the fourth quarter of 2003 was equity long/short, sucking in $6.2 billion in new investment, followed closely by event driven strategies which attracted $5.9 billion in new money. Meanwhile, global macro funds also generated significant sums of new capital, accounting for a further $3.3 billion of fourth quarter inflows.

The Tass figures are based on a sample of 3,500 funds with combined assets of $470 billion. In total, it estimates that there are now 6,700 hedge funds and 1,700 funds of hedge funds with combined assets of around $750 billion.

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