Hedge Fund Inflows Top $100 Billion in 2004

by Phillip Morton, Investors Offshore.com

22 November 2004

The hedge fund industry attracted more than $100 billion in new assets in the first three quarters of 2004, although inflows have cooled somewhat in the last three months, according to research by Tremont Capital’s Tass Research division.

The figures show that in the first quarter of the year, hedge fund inflows totalled a substantial $43.3 billion, which was then followed by an intake of $38.2 billion and $25.1 billion for the second and third quarters respectively.

Explaining the slower third quarter flows, Robert Schulman, joint CEO of Tremont Capital Management said they "are more in line with a growth pace that can be expected as the global pool of assets under management by hedge funds gets larger.”

Tass reports that the three most popular strategies in the third quarter in terms of inflows were Event Driven, Long/Short Equity and Global Macro, accounting for more than half of the net quarterly inflows. These three strategies were also the most popular with investors throughout 2003.

Mr Schulman observed: "The third quarter asset inflows favoured strategies with broad investment latitude.”

However, he added that the rapid growth of the industry over the past few quarters has led to a shortage of new managers in certain styles such as Equity Market Neutral, "thus leading to continued growth in strategies with less capacity constraints.”

Schulman indicated that Global Macro is becoming an increasingly popular strategy among investors, contrasting with Convertible Arbitrage, which experienced net outflows in the last quarter.

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