Early data show February hedge fund flows flat

Date: Thursday, March 12, 2009
Author: Svea Herbst-Bayliss, Reuters.com

Hedge funds likely held on to most of their assets in February, with preliminary data showing withdrawals were minimal, after investors pulled out hundreds of billions of dollars in the preceding five months.

"The very early numbers show that redemptions were minimal in February," said Vincent Deluard, global equity strategist at TrimTabs Investment Research. "Right now we are saying that flows were mostly flat during the month."

Outflows may have stabilized because performance has improved after the industry delivered its worst-ever 19 percent loss last year. Also, hedge funds, unlike mutual funds, lock money up for longer periods and generally do not let investors exit every month.

TrimTabs, which calculates hedge fund industry asset flows with industry research group BarclayHedge, said investors pulled out $93.3 billion in assets in January. They pulled out $118 billion in December.

Because hedge funds are not required to report performance or assets, all numbers calculated by tracking groups are watched carefully for potential new trends.

"Hedge fund redemptions were the big story of the fourth quarter," Deluard said. The feverish pace of redemptions has slowed even if it has not gone away completely, he said.

Final February asset flow data will not be available for some time, industry analysts said.

TrimTabs' early numbers suggest a ray of hope in the badly battered hedge fund industry, which some analysts and managers expect will shrink to $1 trillion by the end of 2009. At the start of 2008, global hedge funds managed $2 trillion after pension funds and endowments piled in so quickly that assets doubled in about three years.

In the five months from September -- when the global financial crisis deepened after Lehman Brothers collapsed and markets began tumbling -- to January, investors pulled $337 billion out of hedge funds.

For all of 2008, redemptions were a record $167 billion. Hedge funds had net inflows at the start of the year. (Reporting by Svea Herbst-Bayliss; editing by John Wallace)