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• Total estimated hedge fund assets at the end of September 2011 were $2.463 trillion, a decrease of 2.92%, or $74.1 billion from August. Performance accounted for a decrease of $59.5 billion and investors accounted for a net outlfow of $14.5 billion.

• Average hedge fund return in Q3 2011 was -5.97% and investors withdrew an estimated net $19.3 billion. These represent the first quarterly loss and net redemption since the financial crisis.

• Falling commodity prices along with volatile equity markets and large losses from emerging market funds weighed most heavily on hedge fund returns in September.

• Fixed income strategies continued to outperform equity funds, the latter posting negative average returns for the fifth consecutive month and falling -9.34% in Q3 vs. -1.39% for FI strategies.

• Mortgage sector funds posted their second consecutive aggregate decline and their worst return monthly since November 2008, however the HFN Mortgages Index was +9.28% through Q3 2011.
• Investors withdrew more than they allocated to Japan focused funds in September at a rate above the industry average. Developed Europe focused funds also faced net investor outflows for the fourth month in the last five.

• Emerging markets funds continued to lose assets at an above average rate in September. The group had an estimated $1.8 billion in net redemptions during the month and $4.8 billion in Q3.

• Investors appeared to be reducing exposure to credit strategies during Q3 as redemptions came at a higher rate than that of equity strategies for the first quarter since Q1 2010.

• Fixed income arbitrage and event driven strategies had among the highest rates of net outflow in September. Global macro was among the few strategies with net allocations.

• Asia domiciled funds continued to increase AUM due to net investor flow in September. The region has seen above average growth rates throughout 2011.

High volatility across most major markets was the norm in September caused primarily by the ongoing sovereign crisis in Europe and worries over the size and timing of the EFSF bailout fund. The resulting reduction of exposures to risky assets during the month appeared to benefit FX and government bond focused strategies which posted aggregate returns of +1.88% and +1.12%, respectively, during the month.

(press release)

BG