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Inflows total USD 16.0bn in October as hedge funds post best monthly return in seven years

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TrimTabs Investment Research and BarclayHedge report that hedge funds posted an estimated inflow of USD 16.0 billion in October, the lowest since January 2007, but well ahead of inflows in

TrimTabs Investment Research and BarclayHedge report that hedge funds posted an estimated inflow of USD 16.0 billion in October, the lowest since January 2007, but well ahead of inflows into equity mutual funds.

‘Although the October inflow was down a bit from prior months, it is stunning to note that year to date, hedge fund flows of USD 279 billion are more than three times equity mutual fund flows of USD 79 billion,’ says Charles Biderman, chief executive officer, TrimTabs Investment Research.

‘The hedge fund industry’s 3.5% return in October was the highest in the past seven years,’ says Sol Waksman, chief executive officer of BarclayHedge Ltd.  ‘Nevertheless, recent market turmoil has made investors a bit more cautious about investing in hedge funds.’

Breaking out the estimated USD 16.0 billion inflow into all hedge funds in October, funds of hedge funds received an estimated USD 18.8 billion, while direct investment into hedge funds was negative, totaling an estimated -USD 2.8 billion.

Since funds of hedge funds attracted plenty of cash and the hedge fund industry posted strong returns in October, inflows into all hedge funds probably increased in November.  The most popular hedge fund categories in October were Multi-Strategy and Equity Market Neutral, which posted estimated inflows of USD 3.8 billion and USD 3.7 billion, respectively. 

‘Inflows into Multi-Strategy have been strong all year, but inflows of Equity Market Neutral have been much more volatile,’ notes Biderman.  The least popular hedge fund category in October was Fixed Income, which lost an estimated USD 2.2 billion, its third consecutive outflow.  It is not surprising that this category was unpopular since its year-to-date return of 2.8% is the lowest of any hedge fund category.

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