Investing May 24, 2001

Hedge Funds Draw Best Quarter Since 1998

May 24, 2001 (PLANSPONSOR.com) - Hedge funds attracted a net $6.9 billion in the first quarter, the largest quarterly inflow since the first quarter of 1998, and nearly as much as in all of 2000, according to Tass Research.
Reported by

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:

Get more!  Sign up for PLANSPONSOR newsletters.

  • 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.

«