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Investors back hedge funds as performance rebounds

Date: Monday, March 12, 2012
Author: Laurence Fletcher, Reuters

Investors ploughed more money into hedge funds over the past month, data from hedge fund administrator GlobeOp shows, as hopes of a resolution to the euro zone debt crisis and a rebound in markets boosted confidence after last year's losses.

Net inflows into hedge funds, as measured by the GlobeOp (GO.L) Capital Movement Index, which tracks monthly net subscriptions to and redemptions from hedge funds managing around $174 billion, were 2.1 percent of total assets over the month to March 1.

While this was slightly down on last month's 2.22 percent, it is nevertheless the second-highest inflow over the past six months and above the 1.12 percent recorded last March.

Investors have been cheered by an upturn in hedge fund performance so far this year, as markets have rallied in the wake of the European Central Bank's one trillion euro cash injection to try and head off a second credit crunch.

Hedge funds lost 5.3 percent last year, according to Hedge Fund Research, as they struggled to cope with volatile markets amidst the deepening euro zone crisis. However, in the first two months of the year the average hedge fund gained 4.95 percent.

"Last year was a bad year for markets overall, but people feel a little more settled now," GlobeOp's chief executive Hans Hufschmid told Reuters.

"In the last two or three months the whole uncertainty about Europe has settled down a bit and the economic numbers in the U.S. are looking pretty positive, and people are happier to allocate to hedge funds."