Asset Flows Update

After ending 2010 with excellent results, the hedge fund industry slowed down in January and delivered a flat to slightly positive performance. The Eurekahedge Hedge Fund Index advanced 0.06%1 in January – a month marked with mixed returns among underlying strategies. The MSCI World Index was up 1.87%2 during the month.

Total assets under management reached US$1.68 trillion as investors continued the strong allocation activity from the last quarter of 2010. Performance-based growth was negative during the month, with the industry losing US$2.13 billion, primarily because gains in the sector were offset by negative returns by a few large macro hedge funds. Asset flows were positive for the seventh consecutive month as resurgent market sentiment led investors to allocate net capital to the tune of US$3.39 billion. Although January is usually a slow month for asset flows, the excellent returns posted by hedge funds in the last quarter of 2010, as well as improving macro-economic fundamentals, have led to strong interest among investors to allocate to hedge funds.

Figure 1 shows the monthly asset flows across the hedge fund industry since December 2008.

Figure 1: Summary Monthly Asset Flow Data since December 2008

Below are the highlights for January:

  • North American hedge funds witnessed 12 months of net positive asset flows – the longest continuous stretch of positive asset flows since 2004.
  • Assets under management in global hedge funds reached US$1.68 trillion – making them on track to cross US$1.7 trillion...

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1Based on 54.19% of funds reporting the January 2011 returns as of 14 February 2011.

2 The MSCI World Index Free – Local Currency