NEW YORK (HedgeWorld.com)–Total assets in hedge funds grew 3.3% in the third quarter to US$688 billion due to robust returns, according to Hedge Fund Research, Inc.

But at the same time net US$5.5 billion in assets left the industry. This outflow was concentrated in global macro funds, which gave back almost US$5 billion during the third quarter after receiving US$5.8 billion in the previous three months. Equity hedge and relative value arbitrage also experienced net outflows, more than US$1 billion each.

On the other hand, event-driven and merger arbitrage strategies attracted new money, probably because of signs of reviving mergers and acquisitions activity. Close to US$1 billion moved to the event-driven sector, bringing its total assets up to US$85.8 billion.

Investors also favored fund of funds, pouring US$4.4 billion into them in the third quarter. Fund of funds now control more than $225 billion in assets, or 33% of the industry total.

“Year-over-year, the industry has continued to gain net new assets, with total inflows totaling approximately US$54 billion on a trailing 12-month basis,” said HFR President Joshua Rosenberg, in a statement.

“The fund of funds sector has proven to be the single most attractive category to investors, posting positive inflows for both the quarter and the trailing 12 months.”

The return on the HFRI fund-weighted composite index was 4.3% for the quarter. Emerging markets, hedged equity and macro were top performers. Distressed and non-hedged equity also did well.

CKurdas@HedgeWorld.com