Hedge Fund Inflows Reversed At End Of 2002, Says Tremont

Investors Offshore, London

28 February 2003

Figures provided by Tremont Advisers clearly show how investors backed away from hedge funds in 2002 after an explosion of interest in 2001. In the fourth quarter of the year investors withdrew $696 million from the alternative investments, while net inflows for the whole of 2002 were just $16.3 billion; a little more than half of 2001's record $31 billion.

The largest net outflow during the fourth quarter was in Long/Short Equity, which lost a net $2.8 billion, followed by Event Driven and Global Macro. But Barry Colvin, chief investment officer of Tremont Advises, expects some of the money that left hedge funds in the fourth quarter will return this year as investors rebalance hedge fund portfolios.

Equity Market Neutral gained the most in assets in the fourth quarter. “Once again, hedge fund investors seemed to be rewarding those strategies, such as Market Neutral and Managed Futures, that are non-correlated to major markets and indices,” said Colvin. “In addition, the flight to fixed income continued, reflecting a desire to stay in conservative strategies and protect principal.”

Tremont Advisers, an affiliate of OppenheimerFunds, Inc., describes itself as a diversified holding company that, through its subsidiaries, conducts a multi-faceted global alternative investment business consisting of consulting services, database sales and information, and proprietary investment product development and distribution. Tremont Advisers, through its subsidiaries, has more than $8 billion in assets under management and advice, including $2 billion invested in its proprietary products. Tremont is headquartered in Rye, New York and has offices in Toronto, Bermuda and London.

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