Hedge funds post record-breaking inflows

The hedge fund industry posted record inflows of more than $60 billion during the first quarter, bringing total assets under management to $1.57 trillion, according to data released today by Hedge Fund Research Inc. The HFRI Fund Weighted Composite Index returned 2.81% in the first quarter, with the Emerging Markets and Merger Arbitrage strategies up 5.06% and 4.83%, respectively. The Standard & Poor's 500 returned 0.64% during the quarter, while the MSCI World returned 2.06%. "Investors are actively allocating to hedge funds and the performance that they are observing is meeting their expectations and motivating them to increase their allocations to hedge funds," said Ken Heinz, president of Chicago-based HFR. Mr. Heinz added that the credit and emerging market cycles have been relatively long and does not seen any warning signs that the cycles are coming to an end anytime soon. "We have not seen evidence that the trends are approaching the late stages," he added. The net inflows reflect a 295% increase over the fourth quarter of 2006, when the industry recorded $15.7 billion in new fund flows, and was equal to nearly half the record $126 billion in assets gathered in 2006. Dominating the inflows were the Equity Hedge and Relative Value Arbitrage strategies, which record quarterly inflows of $20.4 billion and $10.3 billion, respectively.