Hedge fund investors continued to allocate fresh capital to funds, with new capital inflows of USD8.86bn in August, albeit less than the USD16.8bn inflow in July, according to data from He
Hedge fund investors continued to allocate fresh capital to funds, with new capital inflows of USD8.86bn in August, albeit less than the USD16.8bn inflow in July, according to data from Hedge Fund Research, the provider of hedge fund industry information and performance data.
Through August for all of 2007, net flows totalled a record USD144.5bn, compared with USD126.47bn for all of 2006, the highest yearly total on record. However, total industry assets under management fell to USD1.74trn at the end of August, from USD1.76trn in July, as a result of a performance-based decline in assets.
‘Investors continued to opportunistically allocate new assets to hedge funds despite the volatility experienced by the markets in August,’ says HFR president Kenneth Heinz. ‘That decision was rewarded in September, as the HFRI Fund Weighted Composite returned nearly 3 percent, reversing the loss from the prior month.’
Among those strategies experiencing strong positive flows during August were event driven, with USD2bn in new assets; relative value arbitrage, with USD2bn; merger arbitrage, with USD1.1bn; and sector-focused hedge funds, which collectively took in USD1.2bn in new assets in August.
The greatest share of capital inflow was through funds of funds, with USD5.8bn of the USD8.8bn in net new flows. Macro and equity hedge strategies experienced outflows for August of USD455 million and USD345 million, respectively. But despite the outflow in August, both strategies have experienced strong capital inflows for 2007 so far.
The fact that all but USD3bn of the net new money allocated to hedge funds in August went to funds of funds means that leaving aside the injection of USD3bn by Goldman Sachs and associated investors into its ailing Global Equity Opportunities, fund flows to single-manager hedge funds were flat for the month.
Hedge Fund Research found that, excluding USD5.8bn going into funds of hedge funds, the industry raised more than USD3bn of new money in the month – almost exactly that put in to rescue Goldman’s Global Equity Opportunities (GEO) fund.
Fund performance rebounded broadly in September, with the HFRI Fund Weighted Composite Index gaining nearly 3 per cent for the month. Hedge funds focused on emerging markets gained 4.91 per cent, while sector funds, macro strategies and equity hedge all gained more than 3.25 percent.
Funds of hedge funds also produced strong performance for the month, gaining 2.41 percent after declining 2.12 per cent in August. The only strategy producing negative performance was short selling, which declined 3.14 per cent in September after gaining nearly 12 per cent over the previous three months.
HFR data is based on the more than 11,000 funds tracked historically by the firm, including the more than that 7,000 funds report to the company as part of the HFR Database subscription product
Founded in 1993, Chicago-based HFR Group is a leading global provider of hedge fund data, research, indexation and asset management, and includes Hedge Fund Research and HFR Asset Management. Hedge Fund Research produces the HFR Database and distributes the HFRI and HFRX indices used benchmarks for hedge fund industry performance.
