The Dow Jones Credit Suisse Hedge Fund Index team today released a new paper entitled, “Q3 2010 Hedge Fund Industry Review,” which states that hedge funds have surpassed their previous high water marks and asset flows are returning to the industry.

Hedge Funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index (“the Index”), are up 5.98% year-to-date as of September 30. The positive performance has catapulted the industry past its previous high water mark, with the Index officially regaining all losses from the drawdown which occurred during the recent financial crisis. In addition, assets have returned to the space with inflows of over $14 billion, the largest since the first quarter of 2008.

The report examines the current return drivers in the industry and explores some of the noteworthy trends that have characterized markets in recent months. Some key conclusions from the report include:

• Performance among the ten index sectors was largely positive with eight out of the ten sectors in posting positive performance for the first three quarters of the year;

• Top performers year to date include Fixed Income Arbitrage (+9.8%), Global Macro (+9.3%) and Emerging Markets (+7.7%);

• Consistent performance throughout the third quarter enabled managers to surpass their previous high water marks;

• Overall industry assets increased by an estimated USD $14 billion in the third quarter, exceeding total asset flows from the first two quarters of the year combined;

• Including performance gains, estimated industry assets under management currently remain at $1.6 trillion (as of September 30, 2010 ).