New Research Shows Drop In Hedge Fund Demand

by Phillip Morton, Investors Offshore.com

16 August 2004

New data released by Hedge Fund Research Inc. has revealed a cooling in hedge fund demand in the second quarter of 2004, with asset inflows slowing considerably compared to previous quarters.

HFR’s data shows that hedge funds took in $7.5 billion during the 2nd quarter of 2004 – considerably less than the record $38.2 billion pumped into the industry in the first quarter, as measured by Tass Research.

Hedge funds have taken in an average of $21.2 billion in recent quarters, according to HFR.

The second quarter of 2004 was also disappointing for the hedge fund industry in terms of performance, reports HFR. The research revealed that hedge funds lost an average of 1% between April and June, making this quarter one of the worst for hedge funds since 2002. Analysts have attributed poor results in the hedge fund sector to trendless equity markets which continue to drift within tight ranges.

The president of HFR, Joshua Rosenberg, noted "It was a difficult quarter for hedge funds to find opportunities to look for an edge.”

However Rosenberg believes the dip in hedge fund demand is a temporary aberration and stronger asset inflows are likely to resume in the coming months. “Our data show that there has been a slowdown in inflows, but I don't think it indicates trouble in the industry," he said.

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