Investors pulled $127 million from hedge funds in the fourth quarter amid wide swings in global markets, leaving the industry with $2.01 trillion in assets, according to Hedge Fund Research Inc.
Clients deposited a net $70.7 billion throughout 2011 as managers lost an average 5 percent, the Chicago-based research firm said in a statement today.
More than 70 percent of net capital went into hedge funds that managed more than $5 billion, the company said, as investors sought out the stability of larger firms. About 60 percent of hedge funds experienced withdrawals in the last three months as the European sovereign-debt crisis roiled markets around the world.
“Clearly 2011 was a year that was disappointing to investors,” Ken Heinz, president of Hedge Fund Research, said at a presentation today. “The unprecedented nature of the macro environment created challenges for fundamentally driven strategies.”
Macro strategies, which seek to profit from broad economic trends by trading everything from currencies to commodities, and relative-value arbitrage, were the most popular among investors last year, Hedge Fund Research said.
Macro funds received net deposits of $7.9 billion in the fourth quarter and $27.9 billion for the year as they lost 3.8 percent for investors, the firm said. Relative value-arbitrage, which seeks to profit from price differences across markets, got $5.9 billion in the fourth quarter and $35.9 billion in 2011 as managers posted a 0.5 percent gain.
Equity and event-driven hedge funds, which seek to profit from events such as mergers, suffered withdrawals. Investors pulled $8.6 billion from equity funds in the fourth quarter, reducing net deposits for the year to $2.2 billion, the firm said. Event-driven strategies had withdrawals of $5.3 billion in the quarter, while deposits for the year were $4.6 billion.
Fund of hedge funds, which allocate money to managers on behalf of pension funds and other clients, experienced withdrawals of $7.2 billion in the last quarter, leaving assets at $629 billion, Hedge Fund Research said.
Industry assets peaked at $2.04 trillion at the end of June, before falling to $1.97 trillion in the third quarter, according to the firm. A 1.1 percent performance gain in the fourth quarter offset withdrawals in the period, Hedge Fund Research said.
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