Hedge Fund Investors Playing It Safe

by Carla Johnson, Investors Offshore.com

27 August 2004

The latest Reuters/LJH hedge fund poll has found that investors tended to opt for safer strategies in the second quarter, eschewing more risky funds as the hedge fund sector struggled against drifting equity markets.

The survey of 38 international hedge fund companies focused on the allocations made by their clients to both onshore and offshore funds in the second quarter. It shows that investors added $781.9 million to hedge funds during these three months. It also found that investors have tended to pull money out of riskier strategies such as emerging markets and global macro funds.

In the second quarter, equity funds seemed to have been preferred by investors, who added $426.83 million into these strategies; convertible arbitrage funds were also popular, with investors adding $143 million, according to the survey.

By comparison, in the first quarter, when 63 hedge funds responded to the poll, the data showed that investors added $2.1 billion, favouring emerging market strategies.

Funds of funds, which invest money for their clients in a number of different hedge funds to spread the risk, remained the biggest investors for fund managers, adding $414.9 million in the quarter, the research shows.

"The demand for safer strategies goes up when people lose money and many people did that this year," Paul Glazer, partner at New York-based hedge fund Glazer Capital, told Reuters.

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