Hedge Fund Flows Hit Record High

March 12, 2002 (PLANSPONSOR.com) - A whopping $8.8-billion in net assets flowed into hedge funds in the final quarter of last year, bringing year-to-date additions to the asset class to a net $31 billion, according to TASS Research.

The gains, both annual and quarterly, were the largest recorded by TASS since the group began keeping record in 1994. The Event Driven, Long Short Equity and Convertible Arbitrage categories attracted the most assets for both the quarter and the year.

The previous quarterly record was set in the second quarter of 2001 when a net $8.4-billion flowed into hedge funds, while 1997 held the previous annual record flow, when $22.2-billion of net assets poured into the industry. 


Strategies that were negatively correlated to the equity market attracted both institutional and high-net-worth investors, who moved away from Long Short Equity and Global Macro funds in favor of Fixed Income Arbitrage and Event Driven.

Event Driven funds attracted the most assets, bringing in 24% or $2.1-billion over the quarter and $8.3-billion over the year, as investors sought to take advantage of distressed market opportunities.

Long Short Equity funds took in slightly less, 22% of assets, or $1.9-billion for the quarter, and $7.9-billion in total for 2001. While this category attracted more assets than in the third quarter, investors trimmed their exposures relative to the previous year, TASS reports.

Convertible Arbitrage took in 18%, or $1.6 billion in net assets, in the fourth quarter, significantly less than the 30% it attracted in the previous quarter. The strategy gained $7.1 billion for the year.

Fixed Income Arbitrage also continued to increase its assets as investors sought to take advantage of the easing by the US Federal Reserve and a general flight to quality. For the quarter, the category gained $1.3-billion year and $2.1-billion for the year, according to TASS.