Q3 Hedge Flows Rebound Sharply

December 13, 2000 (PLANSPONSOR.com) - Hedge fund investment underwent a dramatic turnaround in the third quarter, with $4.2 billion in net new investment, contrasted with a $4.9 billion outflow in the prior three months.

Overall, hedge fund investments attracted $6.1 billion, with $1.9 billion in outflows.

Longing for Long/short

Long/short equity funds drew the vast majority (83%) of the new investment in the third quarter, according to figures reported by TASS Research, the information/research subsidiary of Tremont Advisers.

Also pulling a significant investment was the event driven category, which drew $1.6 billion.  Much of this flowed toward US and European risk arbitrage, according to the release.  Event driven investing attempts to profit from “pricing inefficiencies” resulting from some type of corporate event, such as a merger or spin-off.

The net gaining categories were:

  • $3.500 billion – Long/short equity funds
  • $1.600 billion – Event Driven
  • $0.563 billion – Convertible arbitrage
  • $0.460 billion – Equity market neutral

Saying ‘No’ to Macro

Investors continue to be pull back from global macro funds, withdrawing nearly $1.4 billion in the quarter. Global macro investing now represents just 10% of assets under management in the hedge fund industry compared with 30% at the beginning of 1994, according to TASS.

Categories suffering net outflows were:

  • $1.400 billion – Global macro
  • $0.272 billion – Managed futures
  • $0.133 billion – Emerging markets
  • $0.066 billion – Short selling
  • $0.032 billion – Fixed income arbitrage

TASS Research provides data on the performance of more than 2,500 alternative investment managers and funds.