Q2 Sees Record Hedge Inflows

August 16, 2004 (PLANSPONSOR.com) - Hedge funds enjoyed a record $43.5 billion asset inflow in the second quarter of 2004, according to data from Tremont Capital Management.

A Tremont news release said Q2 was the fifth consecutive record in quarterly net inflows, coming on the heels of net inflows of $38.2 billion in the first quarter of the year.  In 2003, the global hedge fund industry as measured by Tremont’s TASS Research grew by $72.2 billion in net assets.

The new reported flows heavily favored three major equity-oriented strategies – Long/Short Equity, Event Driven and Global Macro, the fourth quarter in a row during which inflows favored those strategies, Tremont said.  In order, the categories received net inflows of $13.5 billion, $7.7 billion and $6.3 billion, and accounted for more than half of the quarterly net asset flow.  The strategies also were the most popular for all of 2003.

“The second quarter inflows indicate investors’ extraordinary appetite to participate in equity markets in light of strong performance last year and earlier in 2004,” said Barry Colvin, Tremont president and chief investment officer.  “Our research reflects that both institutional and qualified individual investors were allocating assets to hedge funds last quarter and the interest came from the U.S. and overseas.”

In citing the continued strong growth of the equity-oriented strategies Colvin said multi-strategy hedge funds have been reallocating assets and favoring such areas as Long/Short Equity.  Both Convertible Arbitrage and Fixed Income Arbitrage saw lower levels of net inflows last quarter compared to earlier periods.

The TASS quarterly analysis of hedge fund flows is based on approximately $575.8 billion in hedge fund assets. TASS currently estimates the global industry’s asset base at approximately $870 billion, with an additional $260 billion estimated to be in privately managed accounts.