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July 24, 2005
New asset inflows to continue in 2005 despite low returns of Hedge Funds
Several hedge funds reported losses in the first half of 2005. Most of these losses were made by funds employing convertible arbitrage who suffered redemptions due to the downgrade of bonds of two major auto makers. However, despite the overall dismal performance of the industry, industry analysts feel that this will not prevent the investors from pumping in more money into the funds in the remaining year. Therefore the 3rd and 4th quarter are likely to show improvement. According to data from Tremont Capital Management, 2003 and 2004 has new investor money inflow of $72.2 billion and $123 billion respectively. In 2005 Hedge Funds inflows were to the tune of $24.6 billion. Senior hedge fund specialist for Standard and Poor's, Justin Dew commented that this looks like a slowdown when compared to the previous two years performance. 2003 and 2004 were boom years for the industry anyway. Therefore if you look at the performance in isolation, it is perhaps not phenomenal but is still fine. Hence the industry is stable and can expect a good performance and inflows of money in the remaining part of the year. Hedgeco.net reports:
“While asset inflows into hedge fund portfolios were flat during the second quarter of 2005, hedge fund analysts don’t think such flat return would deter new investors from investing in hedge funds.”
Read More: Low Hedge Fund returns in 2005 unlikely to stop new asset inflows .
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