Hedge fund inflows plunge 75%

Date: Monday, July 21, 2008
Author: Christine Williamson, Pensions&Investments

Net flows into hedge funds totaled $29 billion in the first six months of 2008, 75% less than the $118 billion in inflows during the first half of last year, according to Hedge Fund Research.

Net inflows of $12.5 billion in the second quarter were the lowest since the fourth quarter of 2005, according to HFR data.

Pensions & Investments’ tally of reported mandates found that institutional hedge fund hiring and search activity involved a combined $19 billion in the six months ended June 30. Open searches for hedge fund and fund-of-funds managers totaled about $7 billion, while hires were about $12 billion.

While institutional hedge fund investments and commitments in the first half of this year is 46% less than the $42.7 billion P&I estimated was invested or earmarked for hedge funds for the first six months of 2007, it actually represents an uptick of activity on a quarterly basis. Institutional hedge fund activity peaked at $25 billion in the first quarter of 2007, according to P&I estimates, slipping in every quarter last year to a low of $8.8 billion in the first quarter of 2008. Search and hiring activity began to rise again in the second quarter and ended the three-month period around $10 billion.

Kenneth J. Heinz, president of HFR, accredited much of the strong $23 billion net inflow into hedge funds of funds in the first half to institutional investors. HFR reported that net inflows to funds of funds totaled $14.2 billion in the first quarter and $8.8 billion in the second quarter.