Hedge-Fund Assets Increased $7.8 Billion in October

Date: Wednesday, November 18, 2009
Author: Tomoko Yamazaki and Warren Giles, Bloomberg

Hedge-fund assets increased by $7.8 billion in October, a sixth straight monthly gain, led by European managers as the region emerges from recession, Eurekahedge Pte said.

Net inflows totaled $10.2 billion, while performance-based losses were $2.4 billion last month, the Singapore-based research firm said in an e-mailed report. The funds have total assets under management of $1.45 trillion.

Hedge funds attracted money from investors even as their performance stalled amid global stock-market declines. The Eurekahedge Hedge Fund Index, which tracks more than 2,000 funds globally, lost 0.3 percent last month, ending a seven-month rally. The MSCI World Index fell 1.9 percent in October, ending a three- month gain of 17 percent, on concern stocks had outpaced the prospects for economic growth.

“Hedge funds that are surviving and prospering will see an increase in their assets under management going forward,” said Frank Packard, the Tokyo representative of Hong Kong-based Triple A Partners Ltd., a provider of start-up capital for hedge funds. “Hedge fund investors tend to be more long-term than month-to- month and we may be seeing some people taking money out of the equities market to invest in hedge funds.”

The global hedge-fund benchmark is up 16 percent this year, heading for the best annual performance since 2003, Eurekahedge said. The funds suffered their worst year on record in 2008 amid the global financial crisis.

Some 140 hedge funds started this year through the third quarter, while 150 funds closed, the firm said.

Europe Leads

Europe attracted the most capital, as four out of the five regions in the report had positive net flows for the month. Market increases in Europe through the second and third quarters encouraged investors to add $3.92 billion to funds in the region with the total assets under management reaching about $340 billion, Eurekahedge said.

The economy of the 16 nations using the euro pulled out of recession in the third quarter, the European Commission estimated in September.

Asia, excluding Japan, posted a 3.33 percent gain in capital last month, the strongest among geographical regions in percentage terms, attracting $3.15 billion, as managers sought to diversify investments, the firm said. The region’s total assets under management stood at $102 billion, according to Eurekahedge.

Japanese managers had redemptions in October, losing 1.7 percent as investors were “cautious” about the prospect of economic growth and the ability of hedge-fund managers to “exploit opportunities,” the report said.

‘Choppy’ markets

Net inflows to the industry have exceeded $72 billion since May, Eurekahedge said. It estimates further inflows through the fourth quarter.

The firm expects “choppy” market behavior over the next two months to present investment opportunities, it said. It also expects inflows to rise further as institutional investors tend to place more money with hedge funds in the last quarter, based on historical data.

Funds with so-called macro mandates, which aim to profit from changes in the global economy, attracted the most money in percentage terms, the report showed. Macro strategies reported net inflows in eight of this year’s first 10 months.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.netWarren Giles in Geneva at wgiles@bloomberg.net