WEST PALM BEACH, FL (www.hedgeco.net) – Assets managed by the global hedge fund industry shrunk in the second quarter according to reports by Reuters. At the end of the second quarter in June 2005,the total level of assets managed by hedge funds dropped to $1.06 trillion from $1.08 trillion recorded in March according to Reuters.
The decline was the result of wealthy investor�s withdrawals from their hedge fund portfolios; many are pulled money out because of their disappointment with the level of returns posted by hedge funds. Sol Waksman, president of the Barclay Group told Reuters, “We’re seeing redemptions from single manager funds even as money continues to flow into funds of funds.”
Waksman also said �The data supports the anecdotal evidence that high net worth investors, who typically have shorter-term time horizons and higher absolute return targets, have been selling while risk-averse institutional investors with longer-term time horizons have been buying.” Hedge funds have so far gained about 3.6 percent year-to-date. Part of the losses resulted from credit problems of auto makers which led to the lowering of their credit ratings few months ago. But convertible arbitrage strategies have gained during the past two months. Majority of the new assets flowing to hedge funds are coming from institutional funds. New data also show that such flows are also slowing down.
However it is likely that hedge fund assets flows may pick up again during the third and fourth quarters of 2005. Analysts believe that hedge fund returns in those quarters may be stronger than those of the first two quarters. Stronger returns have always precipitated greater assets flows as well.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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