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Hedge Fund Asset Flows Pass US$100 Billion Mark, TASS Research Says

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NEW YORK (– According to research compiled by Tremont Capital Management Inc.’s* TASS Research, the net flow into hedge funds totaled US$25.1 billion in the third quarter, a figure that brings the net inflow of assets to the industry to a record-breaking US$100 billion for 2004.

For all of 2003, TASS found that hedge funds took in US$60 billion in new assets, which was a record at the time and was a large increase over the previous record of US$31 billion in assets set in 2001.

According to Bob Schulman, co-chief executive of Tremont Capital Management, the industry has experienced tremendous growth in a few short years. That growth has also spurred some concerns about capacity

In a statement, he said that some strategies, such as equity market neutral, for the past few quarters have had a shortage of hedge fund managers in certain styles. Strategies with less capacity restraint have continued to see strong asset flows, with global macro strategies now making up a greater percentage of industry assets because of their ability to put larger allocations to work.

Global macro, fixed-income arbitrage and multi-strategy categories continued to do well in the third quarter. The three most popular strategies accounted for more than half of the quarterly net asset flows. They were long/short equity (US$6.9 billion), event-driven (US$4.6 billion) and global macro (US$4.2 billion).

Convertible arbitrage, because performance problems, had a net outflow of assets, according to TASS. Overall hedge fund inflows slowed in the third quarter, with the first and second quarters attracting US$38.2 billion and US$43.3 billion, respectively.

TASS Research’s analysis was based on an asset pool of US$615.4 billion, representing both U.S. and overseas hedge funds. Officials currently estimate that global hedge fund industry’s size to be approximately US$1.2 trillion, with US$265 billion of those assets being held in privately managed accounts.

*Tremont Capital Management Inc., Rye, N.Y., is a strategic partner of and a minority investor in HedgeWorld.

Contact Bob Keane with questions or comments at: [email protected]