Hedge fund industry assets sink as performance ebbed in second-quarter

NEW YORK Thu Jul 19, 2012 11:08am EDT

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NEW YORK (Reuters) - Even though investors put a net $4.1 billion into hedge funds in the second quarter of 2012, it was not enough to offset performance losses at many funds that resulted in total industry assets shrinking.

Hedge fund capital dropped from $2.13 trillion in the first quarter to $2.1 trillion, with the average fund down 2.7 percent, fund tracking firm Hedge Fund Research said on Thursday.

About 70 percent of all hedge funds recorded net outflows of $39.2 billion last quarter, while the remaining 30 percent gained $43.3 billion in new capital, HFR said.

Investors continued to send cash to the biggest hedge funds in the quarter, allocating over $11 billion to those firms with assets greater than $5 billion. Hedge funds with assets below $5 billion recorded almost $7 billion in outflows.

Fixed income-based relative value arbitrage funds gained $10 billion in new cash in the second quarter, while investors yanked $1.3 billion from equity hedge funds despite gains of 2.2 percent for those funds in the first half of 2012.

Investors' first-quarter partiality to funds that specialize in macro strategies did not extend into the second quarter, when they pulled $3.5 billion from the funds.

Event-driven funds had outflows of $900 million in the second quarter, HFR said.

(Reporting by Katya Wachtel; Editing by Dan Grebler)

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