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22 Jul 2009

Hedge Fund Inflows Reach $19.2 Billion

Hedge funds attracted $19 billion of fresh capital (gross) in June, marking their second consecutive month of net inflows of $6 billion. Nearly 75% of all reporting hedge funds are in the black for H12009, with event driven funds up an impressive 19% (YTD), on average, according to Eurekahedge.

Gross inflows into hedge funds totalled a healthy $19.2 billion (or 1.5% of end-May assets), about two-thirds of which were negated by redemptions of $13 billion. A good portion of these redemptions (nearly $5 billion) represented the assets withdrawn by funds of hedge funds, which continued to witness redemption pressures as investors are increasingly opting to invest directly into hedge funds for better returns and capital protection, as well as relatively lower fees.

The Eurekahedge Hedge Fund Index gained 9.5% while the S&P 500 rose 1.8% over 1H2009. Since Jan-2007, hedge funds are up 10.4%, while the S&P 500 is down over 35%.

1H 2009 Hedge Fund Update: Halfway There - Report

Six months after their worst drawdown on record, hedge funds appear to be demonstrating stronger performance than in some previous recovery periods, such as during the Asian Currency Crisis and the Tech Bubble Burst events.

On average, it has taken hedge funds 13 months to recover from these market disruptions accordind to research peice by Credit Suisse Tremont Index LLC, the research reviews of how hedge funds have repositioned themselves in the first half of 2009 to generate positive returns for five out of the first six months of the year.

The report discusses how hedge funds, as measured by the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”), have generated year-to-date returns of 7.2% through June 30, outperforming, with lower volatility, both key equity and bond indices. Some key takeaways from the report include:

The Convertible Arbitrage, Emerging Markets, and Global Macro sectors have received increased attention as investors began to regain their appetite for risk and global markets rallied.

Performance has improved across most sectors, with the bulk of returns for many strategies moving into positive territory for the year, with 80% of all funds reporting positive returns for the second quarter.

Overall industry assets under management have dropped approximately $18 billion since the end of the first quarter of 2009; we estimate industry assets totaled $1.3 trillion as of June 30 - down from $1.5 trillion at the end of 2008.

As of June 30, 2009, an estimated 9.6% of funds were classified as impaired, meaning they have either suspended redemptions, imposed gate provisions or sidepocketed assets.