WEST PALM BEACH, FL (www.hedgeco.net) – Declining hedge fund returns in 2005 is unlikely to reverse the trend of investors devoting more assets into hedge funds managed vehicles. The majority ofhedge fund losses in 2005 were recorded in portfolios of convertible arbitrage managers, who suffered outflows following the downgrading of the bond rating status of auto makers.
While asset inflows into hedge fund portfolios were flat during the second quarter of 2005, hedge fund analysts don�t think such flat return would deter new investors from investing in hedge funds. In 2003, hedge funds gained $72.2 billion in new investor money, and a record busting $123 billion in 2004, according to data from Tremont Capital Management.
Hedge funds gained $24.6 billion in net asset inflows in the first quarter of 2005, according to data compiled by Tremont Capital Management, Inc. Justin Dew, a senior hedge fund specialist for Standard and Poor’s said, “The flows have slowed significantly, that is due to two things. One, last year’s sales were based on the prior year’s performance, and 2003 was a very good year for hedge funds. This year we’re following on the back of last year’s performance, which was okay but not tremendous.”
Such analysis also seems to support widely help opinions that hedge fund asset inflows will likely continue regardless of slowing returns. As hedge fund returns improve in the 3rd and 4th quarters of 2005 as many believe, asset inflows into hedge fund management portfolios will likely mirror such growing trend.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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