LJH: Hedge Funds Heat Up at Start 2003

April 30, 2003 (PLANSPONSOR.com) - Aggregated flows for all hedge fund strategies during the first quarter of 2003 more than doubled the previous quarter's total, as the Iraq situation headed toward a resolution and corporate earnings reports were surprisingly upbeat.

Investorsput $1.4 billion into hedge funds in the first quarter of 2003, whichrepresents a significant increase over the previous quarter’s inflows of$596 million (See   Hedge Fund Fervor Cools in Q4 ).   During this quarter, funds of hedge funds benefited from the largest monetary inflows at $371.8 million, up from $283.8 million previously, a ccording to a poll of 67 global hedge funds conducted by LJH Global Investments LLC and Reuters.

While hedge funds are proving popular with a greater number of investors than ever, there are increased concerns about risk management and that the use of leverage to boost returns has declined. In the first quarter, investors put $878.8 million into equity hedge funds, and $101 million into equity market neutral funds, which are two strategies that attempt to reduce risk. This follows the pattern of 2002 when investors put $470 million, the bulk of the $596 million they put into all funds, into equity market neutral.

For the second quarter in a row, short-biased funds did not benefit from inflows and commodity trading advisors received just $50.1 million. Global macro hedge funds, which delivered the best returns in 2003, received only $36.8 million. High net worth individuals invested $265.9 million in hedge funds, and pension funds put in $99.8 million, the same as last quarter.