Hedge funds inflows dip below 1Q

Hedge funds pulled in $58.7 billion in new flows during the second quarter, according to Hedge Fund Research Inc. of Chicago. New asset levels came in just below the first quarter’s record levels of $60 billion. The one laggard in the hedge fund group was the merger arbitrage strategy, which lost $125 million in assets, compared to a gain of $408 million in the prior quarter. The most popular strategies were retail value arbitrage, which collected $16.4 billion in new assets; equity hedge, which brought in $12.6 billion; and event-driven, which had inflows of $9.48 billion. In terms of performance, the average hedge fund reached gains of 4.77%, but emerging markets funds led the way, up 8.85% during the period and 14.75% year-to-date. Even though subprime mortgage credit has had an impact on the second quarter, relative value arbitrage strategies, which contain multi-strategy credit funds, still saw quarterly gains of 3.2% and 6.53% year to date, according to the study. “Subprime mortgage exposure has not yet resulted in a generalized, systemic impact on indexes of credit-focused hedge funds or on the broader hedge fund universe,” said Kenneth Heinz, president of HFR, in a statement. ”Specific instances of weakness are at least partially offset by the performance of funds which have minimized their exposure to subprime mortgage credit or maintained short exposure to many of these securities.”