Hedge Fund Assets Fall $170 Billion in Third Quarter

Global hedge fund industry assets fell by $170 billion in the third quarter of 2008 as negative returns of more than 10 percent combined with heavy net outflows, research firm Lipper TASS said.

The data provider said there was a net outflow of $18.6 billion in the third quarter, reversing the trend of the previous two quarters.

Global hedge fund assets fell to $1.63 trillion at end-September from $1.80 trillion at end-June as the industry also generally failed to post positive returns amid the volatility that many were designed to exploit.

The figures appear to confirm fears that investors spooked by the market turmoil have withdrawn from hedge fund products seen as opaque or too complex.

All hedge fund sub-strategies measured by Credit Suisse/Tremont posted negative returns in the quarter. Some funds did however, attract investment.

The Lipper TASS report published Monday showed there were positive flows into Global Macro, Managed Futures, Equity Market-Neutral and Dedicated Short-Bias sub-strategies in the quarter.

The largest hedge fund sub-strategy outflows were experienced by Long/Short Equity, Fixed Income Arbitrage, Multi-Strategies and Emerging Markets, which also posted the steepest negative returns during the quarter.

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