Lipper TASS Hedge Fund Asset Flows Report

Despite hedge funds’ successfully navigating a gloomy macro scenario and concerns over Greece’s fiscal position, the industry recorded negative net flows for first quarter 2010. Redemptions filed at the beginning of the quarter to cash in profits and portfolio reallocation decisions drove investors’ consideration of alternative investments. The quarterly net money outflows amounted to $11.05 billion (fully erasing the fourth quarter 2009 us$7.50-billion net inflows)—a reading 247% worse than the fourth quarter’s.

Key Highlights:

• Money flows of the hedge fund industry for first quarter 2010 dropped 247% from the net inflows of fourth quarter 2009 to $11.05 billion.
  
• First quarter 2010 marked a polarization of money flows across hedge funds; larger funds tended to post relatively larger and positive money flows, while smaller funds recorded relatively smaller and negative outflows.
  
• On a four-quarter rolling-period basis net money outflows of the hedge fund segment amounted to $55.45 billion—an amount accounting for more than 15% of the sum of all negative quarterly money flows to the industry since first quarter 1994.
  
• Despite the net-outflows reading for first quarter 2010, global hedge fund assets are estimated to have increased quarter on quarter—from $1.34 trillion at the end of December 2009 to $1.39 trillion at the end of March 2010.
  
• With the exception of Fixed Income Arbitrage and Managed Futures, which both flipped the sign of fourth quarter 2009’s money flows, net outflows for first quarter 2010 resembled the pattern observed in fourth quarter 2009. The bulk of net outflows in the first quarter were concentrated in selected hedge fund strategies, namely Equity Market-Neutral, Event-Driven, Managed Futures, and Multi-Strategies. Cumulative net inflows for the first quarter accounted for 0.91% of the beginning-of-quarter assets (it was 0.64% for the fourth quarter).