Investors move back into hedge funds in October-data

LONDON Mon Nov 12, 2012 4:00pm EST

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LONDON Nov 12 (Reuters) - Investors put more cash into hedge funds than they withdrew over the past month, attracted back into the sector by one of the few recent months in which managers outperformed stocks, new data showed on Monday.

Net inflows into hedge funds, as measured by the SS&C GlobeOp Capital Movement Index, which tracks monthly net subscriptions to and redemptions from funds, were 0.54 percent of the total during the month to November 1.

The inflows partly reverse exits in the prior month, when investors pulled more money from the industry than they put in for only the third time this year.

The new money is less than the amount investors put into the industry over the same period last year, however. In the month to November 1 2011, inflows totalled 2.01 percent of the total.

Bill Stone, Chairman and Chief Executive Officer at SS&C Technologies, said nervousness ahead of the U.S. election result likely encouraged some investors to pause before allocating more capital, despite the positive performance.

"That put a few people on the sidelines. I think there was a reticence on all financial instruments about where to go," he told Reuters.

Some investors may even exit hedge funds over the next few months, Stone said, so that they can bank profits before an expected move by President Obama to raise taxes on the wealthy.

The inflows into the industry the past month came as the average hedge fund made money. The SS&C GlobeOp Hedge Fund Performance Index rose 0.13 percent during October, bringing 2012 gains to 8.08 percent.

While last month's gains were small, importantly for the hedge fund industry, the rise beat most major equity indices. The S&P 500 dropped 1.4 percent, while the FTSEurofirst 300 was flat.

Hedge funds - which can bet on asset prices falling as well as rising - tout themselves as investors who can make money in all markets, including when equities sell off.

The average hedge fund still lags most stock markets this year, however.

SS&C GlobeOp's data covers around $187 billion of hedge fund assets under administration, or around 8 to 10 percent of the global hedge fund industry.

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