Q207 Hedge Fund Inflow Totals $41.1B

August 28, 2007 (PLANSPONSOR.com) - Investors poured $41.1 billion into hedge funds in the second quarter of 2007 and swelled industry assets to an estimated $1.67 trillion by the end of June when combined with performance gains, according to Lipper TASS, Reuters reported.

The gains came mostly before recent turmoil struck many hedge fund strategies due to market volatility from the subprime lending market meltdown. The advances marked the second biggest quarterly inflow since 1994.

“Today the big bulk of inflows are coming from institutional investors who have a longer-term horizon,” said Ferenc Sanderson, senior hedge fund analyst for Lipper, according to Reuters. “The inflows may take a knock, but will still remain firm. There’s no panic and running for the doors.”

The second quarter inflows came amid “relatively strong performance” for hedge funds of 5.19% by June 30, according to the Credit Suisse/Tremont Hedge Fund Index.

The aggregate hedge fund performance didn’t exceed market indices for the period, however. The S&P 500, for instance, returned 6.28%, while the MSCI World TR returned 6.71%.

The biggest inflows, according to Lipper, were for long-short equity strategies, which gained $14.9 billion, followed by event-driven funds, which gained $12.2 billion. Multi-strategy funds gained $6.1 billion during the period.

Strategies that posted net outflows included global macro funds, which bet on world currencies and sovereign debt and were down by $848 million, and managed futures, which were down by $686.7 million, Lipper said.