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Hedge funds set to rebound by end of year

INVESTMENT flows into hedge funds have turned net positive and the sector is heading towards having assets under management of around $1.75 trillion (&pound;1.06 trillion) by year-end, according to Morgan Stanley.<br /><br />That would take them back up to levels last seen in the second quarter of 2007, it said.<br /><br />The investment bank said in a note&nbsp; that hedge funds were set for renewed growth because investors had begun to focus on risk-adjusted returns.<br /><br />It noted, for example, that inflows into such funds in Britain were around $2.1bn in the third quarter, three times what they were in the first quarter of the year.<br /><br />Morgan Stanley said its research showed sovereign wealth funds, foundations and pension funds were now the biggest source of funds for hedge funds, having eclipsed endowments and funds of hedge funds for high net worth investors.