A news release from Tremont Capital Management reported that interest in hedge funds slowed during the second quarter as the industry recorded its smallest net quarterly inflow since the fourth quarter of 2001. Tremont said hedge funds gained $11.6 billion in net assets during the second quarter of 2005, less than half of the first quarter’s $24.6 billion asset advance.
The strongest performing strategies in the second quarter were Multi-Strategy, Event Driven and Fixed Income Arbitrage. In order, these categories showed net inflows of $6.3 billion, $3.9 billion and $1.8 billion. Convertible Arbitrage had a net loss of $2.9 billion in assets for the quarter and Managed Futures registered a net loss of just under $1 billion for the period.
Tremont said Multi-Strategy funds have been attractive due to the diversity of those portfolios while Event Driven has been popular owing to strong performance of distressed investing. The Convertible Arbitrage category continued to suffer net losses for the fourth consecutive quarter as a result of difficult US convertible market conditions.
The quarterly Tremont Asset Flows Report is based on an asset base of approximately $735 billion in hedge fund assets.