Hedge fund investment inflows reach $13.83 billion in Q2, says Tremont

Hedge funds received a record $13.83 billion in investment inflows at the end of the second quarter of 2003, according to research conducted by US investment adviser Tremont’s Tass Research unit.

Second quarter net inflows almost doubled from the first quarter's figure of $7 billion, said Tremont.

"I believe the strong flows this year demonstrate the fact that institutions are embracing hedge funds as an asset class,” commented Tremont Capital Management's co-chief executive Robert Schulman.

The research also found that strategies that performed best in the previous 12-month period experienced the biggest second quarter inflows. Convertible arbitrage attracted $2.7 billion of investment, followed by 'global macro' investments with $2.5 billion, and managed futures with $2.3 billion. The latter two categories saw some of the largest inflows in the first quarter of the year. The only category to show a net loss of funds was 'dedicated short bias' investments, where there was an outflow of $64 million.

Tremont’s data indicates that $1.7 billion of net flows to the hedge fund industry were directed at new funds. Another finding of the second quarter was a sharp slowing in funds returned to investors. In the first quarter, Tremont calculated that $2.1 billion in net assets were returned, compared with $1.1 billion in the second quarter. Tremont attributes this to a slowdown in the number of hedge funds closing due to performance issues.

The previous quarterly net asset flow record determined by Tremont occurred in the fourth quarter of 2001, when $8.8 billion in net assets were added.

The Tass Research quarterly analysis of hedge fund flows is based on an analysis of approximately $400 billion in hedge fund assets. The research is based on the performance of more than 5,400 funds.

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