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Hedge funds post inflow of USD7.1bn in January

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Hedge funds posted an estimated inflow of USD7.1bn, or 0.5 per cent of assets, in January 2010, according to research by TrimTabs Investment Research and BarclayHedge. 

Total hedge fund assets stand at USD1.5trn, up 23.6 per cent from the April 2009 low, thanks to an unprecedented 11-month winning streak.

“January bucked the trend,” says Sol Waksman, chief executive of BarclayHedge. “The first month of the year typically delivers a redemption-driven outflow. The fact that hedge funds managed to attract money is a good sign.”

Distressed securities funds posted the biggest inflow (6.2 per cent of assets) and the best return (1.8 per cent) in January. 

Multi Strategy funds posted the biggest outflow, while equity long only funds showed the worst return. 

Funds of hedge funds posted an outflow of USD12.6bn, the 17th outflow in 19 months.

“Funds of funds have performed poorly,” says Vincent Deluard, global equity strategist at TrimTabs. “They returned only 12.3 per cent in the past year, less than half of the industry’s average 25.9 per cent gain. That investors are walking away does not surprise.”

Merger arbitrage funds posted the biggest inflow in the past year, while multi strategy funds posted the biggest outflow. Equity market neutral funds returned 1.6 per cent, the worst performance of any strategy. Emerging markets funds performed the best, returning 65.7 per cent.

“The industry has recovered from the late 2008 sell-off in spectacular fashion,” Deluard adds.  “While the S&P 500 sits 30.6 per cent below its October 2007 peak, hedge fund performance stands within three percentage points of its May 2008 record high. More money is almost certainly on the way.”

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