Investors poured a net $24.6 billion into hedge funds globally in the first quarter of this year, and investor appetite for hedge funds shows no signs of abating despite faltering performance and market rumours about some funds running into difficulties.
Nonetheless, Tremont’s Asset Flows Report showed that the total inflow was one third lower than that seen in the first quarter of 2004.
For the first quarter, the strategies that attracted the greatest amount of net assets were Event Driven, Multi-Strategy, Fixed Income Arbitrage and Emerging Markets. In order, these categories showed net inflows of $8.2 billion, $6.5 billion, $4.3 billion and $2.7 billion.
Convertible Arbitrage funds – the only category to show a net loss for the quarter – received $2.8 billion in gross redemptions and the addition of $1 billion in new assets during the quarter.
“The first quarter asset flows show that investors were seeking out strategies that seem to do best in uncertain market cycles - such as Event Driven and Multi-Strategy Funds,” said Bob Schulman, CEO of Tremont Capital Management.
“They also underscore the fact that investors are interested in new opportunities as well as in strategies such as Convertible Arbitrage that have not fared well in order to be positioned for future opportunities in those sectors," he added.
According to Schulman, the $8.2 billion flow to Event Driven reflected good performance over the past year in this strategy and its sub-categories -- distressed and risk arbitrage. The Multi-Strategy category attracted assets from investors due to its ability to diversify into various strategies.
Both Emerging Markets and Fixed Income Arbitrage experienced substantial net inflows relative to their overall assets under management, the Tremont data revealed.
“The environment for fixed income investing in the first quarter was still quite good, and emerging markets has been an area of investor interest owing to the performance of such regions as Eastern Europe and selected Asian and Latin American countries,” noted Schulman.
The first quarter 2005 net inflow of $24.6 billion follows a net inflow of $16.3 billion for the fourth quarter of 2004, and total net inflows of $123 billion for 2004.
The quarterly Tremont Asset Flows Report is based on an asset base of approximately $705.4 billion in hedge fund assets representing a broad array of managers and funds located in the U.S. and overseas. A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, and hedge funds is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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