Mid-size hedge funds pulled in most new money-data

Date: Tuesday, December 15, 2009
Author: Svea Herbst-Bayliss, Reuters

*Investors appear to prefer bigger funds

*Smaller funds eyeing new staff to help pull in money

BOSTON, Dec 14 (Reuters) - Hedge funds that oversee at least $5 billion saw investors add more money than they pulled out in the first nine months of the year, highlighting clients' apparent taste for bigger hedge fund firms, data released on Monday show.

"Hedge funds with between $5 billion and $10 billion were the only net asset gatherers ... having experienced a 5 percent positive net flow," researchers at Barclays Capital wrote in a report.

The report comes as pension funds and endowments are putting new money into alternative assets like hedge funds only one year after the $2 trillion industry suffered a drubbing with heavy losses plus heavy redemptions.

The Barclays report found that very large firms with more than $10 billion in assets saw low inflows and outflows.

Smaller hedge funds that manage between $1 billion and $5 billion experienced the biggest fluctuations in flows, reporting redemptions of 30 percent and inflows of 18 percent.

Big pension funds that manage state or private corporations' money tend to prefer bigger hedge funds where they expect a more stable infrastructure than at smaller firms that may just be starting out.

Barclays found that investors added $150 billion in new money to the industry in the first nine months of the year. Barclays interviewed fund managers whose firms manage a combined total of $387 billion around the world.

The smaller firms, the ones with less than $5 billion in assets, said they plan to hire more staff to help raise more funds.