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Wednesday, October 25, 2006

Hedge Fund Assets Reach $1.34 Trillion

By Yaser Anwar, CSC of Equity Investment Ideas

Hedge fund assets rose to $1.34 trillion in the third quarter as investors poured a record $44.5 billion into the industry, according to Hedge Fund Research.

The inflow of funds indicates that hedge funds haven’t lost their allure to wealthy investors despite unremarkable performance and the collapse of $6.5 billion Amaranth Advisors.

Hedge funds averaged a measly 1% return in the third quarter. The S&P 500, on the other hand, gained 5.66 percent in the third quarter. The MSCI World Index gained 4.05%.

"While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong," said HFR president Joshua Rosenberg, to Dow Jones Newswires. "This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds."

HFR says that more than half of the new money was earmarked for relative value arbitrage, equity hedge, and event-driven strategies.

The best performance came from convertible arbitrage strategies, which were up 2.74% in the third quarter and emerging market strategies, which climbed 2.6 % in the quarter, says HFR.

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