Hedge Fund Inflows Double In Third Quarter

by Phillip Morton, Investors Offshore.com

29 October 2004

New data released this week shows that investors have renewed faith in the hedge fund sector with total inflows doubling in the third quarter of 2004 compared to the second quarter.

According to Hedge Fund Research total inflows into hedge funds reached $16.9 billion in the three months to September, up from $7.5 billion in the second quarter.

The increase may in part be due to an improvement in the performance of the hedge funds, which gained on average 0.9% in the third quarter compared to an average loss of 1% in between April and June.

However, HFR president Joshua Rosenberg believes many investors are looking more into the long term.

"Institutional investors sitting on the sidelines in the second quarter decided to jump in again in the third quarter in part because the hedge fund story from a performance perspective is strong over time."

While some are predicting mixed fortunes for the hedge fund industry, Rosenberg remains optimistic for the alternative sector.

"There is still uncertainty out there, but we are moving into the fourth quarter with a more positive outlook," he observed.

HFR reported that the most popular hedge fund strategy in the third quarter were event driven, pulling in $3.1 billion. These funds have returned 5.4% since January.

Other popular strategies included distressed securities ($2.9 billion) and relative value ($2.2 billion).

Although emerging market funds recovered from losses earlier in the year, investors placed a relatively minor $707 million in these funds.

HFR now calculates that the hedge fund industry manages $889.8 billion, up from $865.9 billion in the second quarter.

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