The hedge fund industry gained $24.6 billion in net assets in the first quarter of 2005, according to research compiled by Tremont Capital Management, Inc.
Tremont’s Asset Flows Report showed a continued interest in hedge fund investing for the recent three-month period, and indicated that more than $10-billion in net assets for the first quarter was attributed to new fund launches in the past year. The flow of hedge fund assets for the quarter also underscored investors’ readiness to back away from poor performing strategies as evidenced by a $1.8 billion net outflow from Convertible Arbitrage.
For the first quarter, the strategies that attracted the greatest amount of net assets were Event Driven, Multi-Strategy, Fixed Income Arbitrage and Emerging Markets. In order, these categories showed net inflows of $8.2 billion, $6.5 billion, $4.3 billion and $2.7 billion. Convertible Arbitrage funds-the only category to show a net loss for the quarter-received $2.8 billion in gross redemptions and an addition of $1 billion in new assets during the quarter.
“The first quarter asset flows show that investors were seeking out strategies that seem to do best in uncertain market cycles – such as Event DrDriven and Multi-Strategy Funds,” said Bob Schulman, CEO of Tremont Capital Management. “They also underscore the fact that investors are interested in new opportunities as well as in strategies such as Convertible Arbitrage that have not fared well in order to be positioned for future opportunities in those sectors.”
Schulman commented that the $8.2 billion flow to Event Driven reflected good performance over the past year in this strategy and its sub-categories-distressed and risk arbitrage. The Multi-Strategy category attracted assets from investors due to its ability to diversify into various strategies. Both Emerging Markets and Fixed Income Arbitrage experienced substantial net inflows relative to their overall assets under management, according to the Tremont Asset Flows data.
“The environment for fixed income investing in the first quarter was still quite good, and emerging markets has been an area of investor interest owing to the performance of such regions as Eastern Europe and selected Asian and Latin American countries,” said Schulman.
The first quarter 2005 net inflow of $24.6 billion follows a net inflow of $16.3 billion for the fourth quarter of 2004, and total net inflows of $123 billion for 2004.
The quarterly Tremont Asset Flows Report is based on an asset base of approximately $705.4 billion in hedge fund assets. The universe represents a broad array of managers and funds located in the U.S. and overseas. Tremont currently estimates the global industry’s assets to be at approximately $1 trillion, with an additional $325 billion estimated to be in privately managed accounts.