Despite hedge funds successfully navigating a gloomy macro scenario and concerns over Greece’s fiscal position, the industry recorded negative net flows for first quarter 2010, research by Lipper Tass shows.
Redemptions filed at the beginning of the quarter to cash in profits and portfolio reallocation decisions drove investors’ consideration of alternative investments.
Money flows of the hedge fund industry for first quarter 2010 dropped 247 per cent from the net inflows of fourth quarter 2009 to USD11.05bn.
First quarter 2010 marked a polarization of money flows across hedge funds; larger funds tended to post relatively larger and positive money flows, while smaller funds recorded relatively smaller and negative outflows.
On a four-quarter rolling-period basis net money outflows of the hedge fund segment amounted to USD55.45bn—an amount accounting for more than 15 per cent of the sum of all negative quarterly money flows to the industry since first quarter 1994.
Despite the net outflows reading for first quarter 2010, global hedge fund assets are estimated to have increased quarter on quarter—from USD1.34trn at the end of December 2009 to USD1.39trn at the end of March 2010.
With the exception of fixed income arbitrage and managed futures, which both flipped the sign of fourth quarter 2009’s money flows, net outflows for first quarter 2010 resembled the pattern observed in fourth quarter 2009.
The bulk of net outflows in the first quarter were concentrated in selected hedge fund strategies, namely equity market neutral, event driven, managed futures, and multi-strategies.
Cumulative net inflows for the first quarter accounted for 0.91 per cent of the beginning-of-quarter assets; it was 0.64 per cent for the fourth quarter.
