Hedge Fund Assets Rise 8% in Q2

August 9, 2007 (PLANSPONSOR.com) - Total hedge fund asset levels increased by 8% in the second quarter of 2007 to $2.59 trillion from $2.4 trillion in the first quarter of 2007, according to the latest figures from HedgeFund.net.

New assets were estimated at $107.3 billion in Q2 while performance gains accounted for an additional $89.6 billion, the second largest gains on record, according to HFN. In the first six months of 2007, hedge funds assets rose 20.4% including $268 billion in new allocations.

Long/Short Equity assets increased 7.7% to an estimated $766.5 billion. Long/short equity funds rode the rise in global equity markets during the first half 2007, bringing in an estimated $15.3 billion in new allocations in the second quarter, according to HFN.   

Fixed Income focused fund asset growth slowed as liquidations increased and performance lagged. After increasing by the fastest rate on record in the first quarter of 2007, total asset growth in fixed income focused funds slowed to a 5.5% growth rate.

As a result of difficulties in credit markets stemming from losses tied to sub-prime mortgage lending practices, fixed income funds experienced near record liquidations of $3.9 billion in the quarter while performance gains added $5.4 billion, the smallest contribution to asset growth since 2005.

Investors continued to move into emerging markets in droves in the second quarter, despite rumblings the space was becoming crowded. Total assets in emerging market funds increased 14.2% in the second quarter of 2007 to $279.3 billion including $20.9 billion in new allocations, the second highest quarter on record.

Allocations to macro funds reached their highest point in a year, with total asset levels increasing 9.6% including $6.9 billion in new assets.Multi-strategy funds are increasingly being viewed as a viable reduced-fee diversification alternative to fund of funds for large institutional investors, according to HFN.

Distressed funds have produced steady returns in recent quarters while remaining relatively uncorrelated to broad equity markets. This favorable characteristic is a main reason distressed funds experienced a third consecutive quarter of double digit growth rates in the second quarter of 2007, attracting $9.54 billion in new allocations to bring total assets to $191.7 billion, an increase of 10.8% over the prior quarter, according to HFN.

Total fund of fund assets, which are not double counted in the total industry figure, increased 9.4% to an estimated $1.25 trillion including $74.5 billion in new assets, the largest quarterly new allocation on record.

For a sample of the report, go to    http://www.hedgefund.net .