Hedge Funds Swell in 2002

The net outflow from hedge funds in the fourth quarter totaled $696 million, representing the first quarterly loss of assets since the second quarter of 2000, when $4.9 billion fled alternative investment strategies.    It was a marked turnaround from the previous quarter, which netted an inflow of $6.8 billion, according to research compiled by Tremont Adviser’s TASS Research.

Topping the list of largest outflow for the quarter was the Long/Short Equity category, losing a net $2.8 billion, followed by Event Driven and Global Macro.

However, the news was not all bad.   The Equity Market Neutral category added $1.3 billion, recording the largest gain for the quarter.   Fixed Income Arbitrage, second on the quarterly inflows list, and Managed Futures, which was third, gained $793 million and $725 million, respectively – both record setting quarterly inflows for those sectors.

Year In Review

Reviewing the final inflow totals for 2002 showed Event Driven and Convertible Arbitrage were the two most popular strategies, gaining a net $3.4 billion and $3.2 billion, respectively.  Other strategies that were in favor included Fixed Income Arbitrage and Equity Market Neutral.  The only category that suffered a net outflow for the year was Dedicated Short Bias, losing a net $17.4 million.

The complete Tremont hedge fund flows analysis for the fourth quarter and all of 2002 is available through  www.hedgeworld.com .