About $8 billion was invested in hedge funds in all of 2000, according to the report.
The increased inflows can be attributed to investors pursuing the following strategies:
- long/short equity investing,
- distressed investing,
- global macro investing,
- convertible arbitrage, and
- equity market neutral.
The Long, Short of It
Hedge fund Investors poured $3 billion into long/short equity funds, accounting for 43% of all net inflows, while event driven funds added a net $1.4 billion during the first quarter.
Much of the new money attracted to event driven funds aimed to capture the distressed investing sub-strategy. That move followed the close of a number of risk arbitrage funds early in the period due to weak deal flow and market saturation, which tightened spreads and depressed risk/reward ratios, according to Tass Research.
Investors were attracted to this strategy by record default volumes and asset-rich, high profile defaults in former investment grade names over the quarter.
Convertible Arbitrage attracted $1 billion, while Equity Market Neutral brought in $940 million in new money over the quarter, both categories up sharply from the previous two quarters as investors fled the equity markets, pursuing the high returns recorded by volatility-led strategies last year.