Global Hedge Fund Industry Suffers $11bn Outflows In Q1

by Phillip Morton, Investors Offshore.com

13 May 2003

Figures released by industry trackers Hedge Fund Research found the total amount of assets held in hedge funds declined by $11 billion in the first quarter of this year, bucking a nine year trend of steady growth.

The numbers show that the amount of money invested in hedge funds by the end of March 2003 was $618.6 billion.

Whilst most strategies faced losses in this period, the most severely affected was the fund of funds sector, which suffered a striking reversal of fortunes, witnessing net outflows of $5.1 billion in Q1 2003 compared with net inflows of $40 billion in the last quarter of 2002.

The next biggest losing strategies were equity and event driven hedge funds which suffered outflows of $2.2 billion and $3.2 billion respectively. Analysts at Hedge Fund Research put this down to very nervous markets as the United States prepared to invade Iraq. Other losing strategies included distressed securities ($1.54 billion), relative values arbitrage ($1.2 billion) and mortgage backed fixed income ($628 million).

Meanwhile, the strategy that recorded the largest gains in the period in question was that of emerging markets, which recorded net inflows of $450 million.

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