Hedge Fund Reader : Hedge Funds still attracting decent inflow of money

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August 03, 2005

Hedge Funds still attracting decent inflow of money

For those who were depressed by the thought of a shakeout in the hedge fund industry, this is some news to cheer about. Trade publication, EuroHedge recently conducted an intensive survey of the hedge fund industry. Findings reveal that despite the ‘unremarkable’ performance of the funds in the first half of 2005, there has been adequate inflow of funds. It stated that in comparison to 128 new funds generating $9.5 billion in the first half of 2004, in 2005, 150 new hedge funds raised over $13 billion in the same period. Therefore although the returns have been lower when compared to that of 2004 (1-2% instead of 3% in 2004), but the funds are still attracting fresh inflow of money. Even the overall projection of a shortfall of 2 to 3 % on returns in comparison to 2004 does not deter the enthusiastic investors. This is primarily because there seems to be a good amount of faith in the funds to generate funds even when the market crashes. Long/short strategy and the flexibility of the funds to merely withdraw the funds from the market and place in deposit (to earn money market interest rates at least) seems to boost this faith. Money.cnn.com reports:

“Traditional fund managers normally track benchmark indices and have to keep most of their assets in the market even when prices are falling, one of the reasons why investors lost large amounts of money during the 2000 equity crash.”

Read Now: Report: Cash still flows to hedge funds

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August 3, 2005 in Research | Permalink