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Hedge funds post inflow of $3.8bn in September and assets surge to $1.62tn

Monday, November 08, 2010
Opalesque Industry Update - TrimTabs Investment Research and BarclayHedge reported that the hedge fund industry posted an inflow of $3.8 billion (0.2% of assets) in September 2010, the third straight inflow as well as the sixth in eight months. Assets surged 2.5% to $1.62 trillion, the highest level since April.

“September was a good month for hedge fund managers,” said Sol Waksman, founder and President of BarclayHedge. “Nine in 10 managers reported a profit for the month, and our Hedge Fund Index increased 3.5%. This is the largest gain since May 2009, and it lifted the index above the October 2007 high-water mark.”

Hedge fund investors were risk averse in September. Equity long only funds redeemed $829 million (1.2% of assets), the heaviest outflow of all fund strategies, while emerging markets funds redeemed $269 million (0.1% of assets), the third outflow in four months. Meanwhile, commodity trading advisors (CTAs) hauled in $5.8 billion, the sixth straight inflow as well as the fourteenth in 16 months. In contrast, funds of hedge funds redeemed $635 million (0.1% of assets).

“It won’t surprise us to see hedge fund managers investing aggressively through year-end, which could keep a strong bid under stock prices,” said Vincent Deluard, Executive Vice President at TrimTabs. “Investors have poured $16.1 billion into hedge funds in the past three months, and managers need to put that fresh cash to work. Also, more than half of managers have failed to poke through their previous high-water marks. In order for these folks to collect performance fees this year, they need to lever up and produce a blockbuster quarter.”

Hedge fund investors continue to pour into debt. Fixed income hedge funds posted an inflow of $1.3 billion (0.7% of assets) in August, the fifth straight inflow. Fixed income funds boast a year-to-date return of 9.6%, far and away the best performance of any hedge fund strategy.

“Fat fixed-income inflows could persist for months even though bond ETFs and mutual funds have sucked in a staggering $710 billion since the start of 2009,” noted Deluard. “The Fed just announced it will load up on Treasuries to the tune of $900 billion through Q2 2011, and it’s a rare treat for investors to be able to piggyback a Fed trade policymakers are telegraphing so clearly.”

(press release)

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