GLOBAL - Fixed income arbitrage worldwide attracted the greatest amount of investment against all other hedge fund strategies during the first quarter, largely buoyed by opportunities in Europe.
The first three months of the year witnessed a u-turn by investors, quarter-on-quarter, as they added US$6.98bn in net assets to hedge fund, according to research by Tremont’s TASS Research. In the fourth quarter of 2002, hedge funds posted a loss of US$696m.
Strategies with the best inflows were macro-oriented. Fixed income arbitrage secured US$3.37bn in assets, followed by managed futures and global macro with net flows of US$2.10bn and US$1.73bn respectively.
Fixed income arbitrage also benefited during the quarter from the launch of several high profile funds.
Many of the new funds are based in Europe where conditions are conducive for trading in a wide array of global bond and futures markets, said Tremont.
“Investors appeared to be returning to a more typical investment pace in the first quarter,” said Barry Colvin, president of Tremont Advisers.
“They were reallocating assets and favouring those strategies that did well in 2002 and in earlier years with the exception of equity market neutral which has some short-term capacity issues.
“Conversely, those areas that lost assets last year, such as risk arbitrage, continued to do so.”
Three categories continued to show outflows, notably event driven (-US$2.09bn) and long/short equity with a -US$721m and dedicated short bias (-US$58m).
“The first quarter showed that macro strategies are definitely back in vogue,” said Stephen Jupp, director of quantitative research at Tremont Advisers.
“A changing economic environment and weaker dollar make for some interesting opportunities.”
The analysis was based on 3,775 funds worldwide, covering 10 strategies and US$350bn in assets.
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