Hedge Funds Hit $8 billion Mark

February 20, 2001 (PLANSPONSOR.com) - Hedge funds gained $2.7 billion during the fourth quarter of 2000 to bring the total in all hedge funds to about $8 billion, according to Tass Research.

Among the types of hedge funds which posted the largest gains in new money in 2000 were:

  • Long-short equity funds gained the most new assets “by a substantial margin,” with a net $1.75 billion being invested during the fourth quarter, according to Tass data.  Some $12.4 billion is now invested in long/short funds, the firm reported.
  • Event-driven funds ranked as the second most popular fund and attracted  $1.4 billion in the fourth quarter to bring their total to $3.59 billion in 2000.
  • Convertible Arbitrage, which was the best performing hedge fund category for 2000, ranked third for the quarter with $853 million in new assets and fourth for the year with $1.7 billion, Tass said.
  • Equity Market Neutral, which traditionally performs well in volatile markets, captured  $447 million for the quarter and $2.3 billion for the year.

Investor Sentiment Evident

Nicola Meaden, chief executive officer of Tremont TASS (Europe) Limited, said the distribution of new money indicated  what investors were seeking to accomplish in their diversified portfolios.

 “For the first time in many years, investors were very serious about selecting trategies with limited net market exposure and low correlation to the overall markets,” Meaden said.

What Goes Up ?

Since hedge fund investing is often opportunistic, some investors suffered from market losses that were often leveraged.

As a result, some significant outflows from hedge funds happened in 2000.  Among the losers were:

  • Global Macro funds suffered the heaviest outflows for the fourth quarter and the year, losing $958 million in the last three months of the year and $9.52 billion for the year.  The outflows reflected funds closing, as well as “continued investor apathy to this category, which did not perform as well in recent years as it had in the mid-1990s, the Tass report said.
  • Fixed Income Arbitrage, which lost $515 million in the fourth quarter and $868 million for the year.
  • Emerging market funds lost $157 million for the fourth quarter and $1.09 billion for the year.
  • Managed futures lost $250 million for the quarter and $651 million for the year.

TASS Research is the information and research unit of Tremont Advisers, Inc., the integrated investment services company specializing in alternative investments.  TASS Research provides data and research on the performance of more than 2,500 alternative investment managers and funds.

– Chuck Epstein         editors@plansponsor.com