Hedge Funds 2010 Inflows

Hedge Funds Expecting Solid Inflows in 2010

Last year was basically a wash in terms of performance as hedge funds performed exceptionally well in 2009 which wiped out the previous year's heavy losses. But a year of solid performance may have revived investor confidence so that 2010 will have solid inflows from investors who remained with hedge funds in the crisis and now are increasing allocations and those who sat out last year and are now returning. "There has been a clear change of attitude toward hedge funds between 2009 and now. Many institutions say they will up allocations, and private investors who stayed on the sidelines for much of 2009 are now coming back," said Max Gottschalk, head of European business at Gottex--which manages nearly $9 billion in fund of hedge funds.

Hedge funds lost an average 20 percent in 2008 as markets slumped. Many funds were forced to liquidate positions at unfavorable prices when investors asked to pull their money out, and in 2009 many of those investors remained in cash.

However, many funds have now recouped those losses, whereas equities are still well below their market peak in spite of the strong run up last year, Gottschalk said.
He said funds of hedge funds were among the first investors to start reinvesting their cash in hedge funds.

"Early last year many funds of funds were holding a large proportion of their portfolio in cash in order to deal with client redemption requests from the end of 2008," he said.
"In the second half of the year they redeployed the cash that was left, which accounted for a large component of the inflows to hedge funds in that period." Source

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