Hedge funds performance in the third quarter of 2006 was less than spectacular, but inflows continue...
Hedge funds performance in the third quarter of 2006 was less than spectacular, but inflows continued at a rapid pace.
More than $44.5bn in new assets flowed into the hedge fund industry in the third quarter of 2006, with relative value arbitrage, equity hedge, and event-driven accounting for more than half of the total, according to data released today by Hedge Fund Research (HFR), a source of hedge fund information and performance data.
This was the second consecutive quarter of record fund flows since HFR began tracking quarterly flow data in 2003.
Total industry assets stood at $1.34 trillion at the end of the quarter, up from $1.084 trillion in the same period a year ago. Emerging markets bounced back from a generally negative performance in the second quarter.
Funds of hedge funds continued to see strong flows, collecting $23.8bn in new assets in the quarter, up from $15.6bn in the second quarter and a negative flow of -$1.2bn in the third quarter of 2005. In addition to the third quarter data, HFR announced it has revised its estimates of total industry assets at the end of the second quarter of 2006 upwards to $1.28 trillion, from $1.23 trillion.
Hedge funds returned an average of 1.01% in the third quarter and were up 7.10% on the year to end September, according to the HFRI Composite index. Fund of funds returned 0.56% on the quarter and 4.77% for the year. Among the larger strategies, convertible arbitrage was the top performer, up 2.74% in the quarter.
This was followed by Emerging Markets (Total), up 2.60%, and Fixed Income: High Yield, up 2.10%. This compares to 5.66% for the Standard & Poor's 500 during the quarter, and 4.05% for the MSCI World index.
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