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From Kirsten Bischoff, Opalesque New York:

The murmurs of apprehension that continue to be heard within the financial markets have not been enough to stop asset recovery in the hedge fund industry. According to TrimTabs/BarclayHedge the month of January, which is typically a month that sees heavy redemptions due to portfolio rebalancing, actually saw industry-wide inflows of $2.9bn.

Apprehension since January has been further fueled by the crisis in the Middle East, continued European sovereign debt worries, US quantitative easing, and now the horrific destruction in Japan that is coupled by both long- and short-term nuclear dangers. During the past few months, several well known managers have opted to shutter their funds, and the most recent - Carl Icahn - cited the extreme volatility of the current markets as one of the reasons for his decision.

Hedge funds have underperformed the market, however, this is largely due to the fact that they continue to keep leverage down to levels below 2007 (recent studies showed hedge funds are currently less leveraged than major banks), and have scaled back their exposure to the markets. (Source).

As a result, investors are viewing hedge funds as a safer way to have exposure on the upside of the markets while maintaining an acceptable level of capital p......................

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