HFR Q1 2006 Report: Inflows reverse small loss from Q4 2005; average return for Q1 is 5.85 per cent; USD 6.4 billion in new FoHF assets

Hedge funds collected USD 24 billion in new flows in Q1 2006 taking total industry assets to USD 1.182 trillion according to HFR's latest report.

Joshua Rosenberg, President of HFR, said: 'It was generally a strong quarter for hedge funds, from both a performance and an asset flow perspective. The strength of the global equity markets along with dynamic movements in commodities, energy and related securities created a favorable trading environment for a majority of hedge funds'.

Reversing a small decline in the fourth quarter of 2005, hedge funds saw inflows totaling USD 24.04 billion, or 2.17 percent, in the first quarter of 2006, according to the latest data released by Chicago-based Hedge Fund Research, Inc. (HFR), the leading source of hedge fund information and performance data www.hedgefundresearch.com and the provider of daily hedge fund index data to Hedgeweek.com

Total industry assets stood at USD 1.182 trillion dollars at the end of the period. Funds of Funds (FOFs), which had also experienced negative flows in Q4 2005, saw inflows of USD 6.4 billion in Q1 2006.
Hedge funds performed well, with the average fund up 5.85 percent in the quarter, according to the HFRI Composite Index, which represents the best quarterly returns since Q2 2003. The Emerging Markets category led the way in the quarter, up 9.43 percent, with the Eastern Europe/CIS subcategory climbing 15.23 percent. The HFRI Fund of Funds Index was up 4.73 percent on the quarter.

Among the largest categories, Equity Hedge, with USD 359 billion in assets, saw USD 8.1 billion in new flows and returned 6.46 percent on the quarter.

Event-Driven, with USD 163 billion in assets, had USD 2.1 billion in new flows and returns of 6.20 percent.

On a percentage basis, Fixed Income: Arbitrage was the biggest asset gainer (for strategies with over USD1 billion in assets), with flows up 19.5 percent (due almost entirely to a very large start-up in that Sector), or USD5.54 billion, to a total of USD34.3 billion. Convertible Arbitrage once again saw negative flows, with the category losing 5.10 percent of assets in the quarter, despite positive returns of 4.86 percent during the period.

'With very strong overall performance early in the quarter, we are seeing flows into the industry pick up once again, in contrast to the recent trend of assets remaining on the sidelines,' Rosenberg said.

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