Hedgie assets up $100bn on stellar gains

HEDGE funds assets grew for the first time in a year in the second quarter, according to data released yesterday, on the back of improved investment performance and a reduction in client withdrawals.<br /><br />Hedge funds controlled $1.43 trillion (&pound;871bn) in assets at the end of the quarter, up $100bn from a quarter before, according to Hedge Fund Research (HFR).<br /><br />It was the first sequential rise in assets under management since June 2008, when the industry reached a peak of $1.93.<br /><br />The data firm said its benchmark index of global hedge fund performance booked a rise of 9.13 per cent over the quarter, the best growth since the last quarter of 1999, as funds snapped out of a spell of massive losses.<br /><br />HFR president Kenneth Heinz said: &ldquo;Reflecting the diverse drivers of hedge fund industry performance, recent gains have occurred in an environment in which developed equity markets have been essentially flat.&rdquo;<br /><br />The best areas of growth were in funds focusing on developing countries, energy and materials stocks and &ldquo;convertible arbitrage&rdquo; funds, which seek to exploit tiny price inefficiencies between different types of stock, he said.<br /><br />&ldquo;These three areas were among the weakest performers in 2008, underscoring the dramatic shift in market dynamics that has taken place thus far this year,&rdquo; added Heinz.<br /><br />Investors withdrew $42.8bn of investments from hedge funds in the second quarter, approximately 60 per cent less than the $103bn that was redeemed in the first quarter and just a third of the record-beating $152bn withdrawal in the last quarter of 2008.<br /><br />Meanwhile, a senior European Union lawmaker said that a draft European Union law that will require hedge fund managers to be authorised needs refining to cover other types of alternative investments better.<br /><br />Sharon Bowles, a Liberal Democrat member of the EU assembly said other types of alternative funds were only now waking up to the fact the draft law&nbsp;&ndash; which has been the subject of massive criticism &ndash; will apply to them as well and not just to hedge funds and private equity.