Business Online – DESPITE so-so performance in the second quarter, hedge funds in the United States pulled in a lot of money from investors, highlighting two trends.

One is that the floodgate of institutional money, which appeared to slow last year, has reopened. The other is that hedge funds, despite their lacklustre returns, are looking attractive on a relative basis.

Hedge funds, on average, gained 0.17% in the second quarter, according to Hedge Fund Research in Chicago. But investors poured $42.1bn (£23.5bn, E34bn) of net new cash into these funds during that period. It marked the biggest jump in quarterly flows since Hedge Fund Research began tracking flows quarterly in 2003, and a large gain from the first quarter of this year, when hedge funds took in about $24bn net.

July’s returns weren’t great, with the Hedge Fund Research Composite Index down 0.21%. Still, some strategies have had good years, with emerging markets up 10.4% this year through July, energy up 11.06% and convertible arbitrage, which had been left for dead last year, up 7.01%.

A note of caution: hedge fund indexes are not as precise as, say, the Standard & Poor’s 500 or the Nasdaq 100. Rather, they are proxies for underlying returns. But these indexes do give an idea of what’s going on with hedge fund performance.

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