Hedge funds up 9.1% in second quarter

Hedge funds came back with a vengeance during the three-month period ending June 30, posting the industry's best performance since the fourth quarter of 1999, according to Hedge Fund Research Inc. in Chicago. The HFRI Fund Weighted Composite Index gained 9.1% in this year's second quarter. This compares to a 15.2% gain by the Standard & Poor's 500 stock index over the same period. In the first quarter, hedge funds gained 0.4% and the S&P 500 lost 11.6%. According to a report released yesterday by HFR, the strong performance for the alternative-class strategies helped fuel a flood of assets into hedge funds. During the quarter, $100 billion was invested into hedge funds, bringing the industry total to $1.4 trillion, according to HFR. The quarter also saw investor withdrawals. But the $42.8 billion taken out by investors was well below the $103 billion withdrawn during the first quarter and the $152 billion withdrawn during the fourth quarter of last year. Inflows into hedge funds were another sign of an improving economic environment, HFR President Kenneth Heinz said in the report. “Improved liquidity in credit market contributed to narrowing some of the pricing dislocations that were created near the end of 2008, and the combination of improved credit markets, gains in emerging markets, and decreased risk aversion have driven broad-based gains in 2009,” he said.