Hedge fund inflows are continuing at a frenzied pace, with the latest quarterly
data from Hedge Fund Research showing that $27.35 billion in new assets were
placed in hedge funds during the first quarter of 2005, bringing total hedge
fund assets to over $1 trillion.
According to HFR, the Event-Driven category attracted the most assets in the
first quarter, taking in $5.9 billion. This was followed by Relative Value Arbitrage,
with $4.6 billion in new assets, and Equity Hedge, with $4.2 billion.
Convertible Arbitrage was the only major strategy to see negative fund flows
in the quarter, losing just under $1 billion.
Performance-wise, hedge funds posted a moderate gain during the first three
months of the year, gaining on average 0.88%, HFR stated. This compared to a
loss of 2.15% for the S&P 500 Index and a decline of 1.55% for the MSCI
World Index over the first quarter.
“This recent milestone of $1 trillion in industry assets is further evidence
that hedge funds continue to appeal to those investors seeking diversified returns
without correlation to equity and bond markets,” observed Joshua Rosenberg,
president of HFR.
“The first quarter again demonstrated the advantage of this approach,
with hedge funds in the aggregate outperforming the major market indices,”
he added.
The downturn in equity markets ensured that Short Selling strategies were a
leading performer during the quarter, gaining 6.15%. This compared to a loss
of 3.79% in 2004. This was accompanied by an increase in inflows to Short Selling
strategies to $208 million in the quarter, up from just $58 million in the final
quarter of 2004.
However, energy funds posted the single best performance for the quarter, gaining
6.27% after posting a strong 35.8% return for 2004. Emerging Markets were also
a notable performer in the first quarter, returning 3.64%. Convertible Arbitrage
was the worst performing strategy, down 2.80% for the period.
Funds of Funds drew in $9.4 billion in new asset flows during the first quarter,
bringing total assets in the category to $371 billion - approximately one-third
of all hedge fund assets.
“With the markets still influenced by choppy trading and a lack of direction,
investors have been directing assets to those strategies that offer more diversification
and downside protection,” added Rosenberg.
“The interest in Event Driven and Relative Value strategies appears to
reflect the general view that now is not the time to be taking on additional
market risk," he noted.
INVESTORSOFFSHORE.COM
