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Hedge Funds See Assets Tumble In Q3

Thanks to broad market declines and volatile trading conditions, hedge funds saw assets tumble $85 billion in the third quarter, according to new data from Hedge Fund Research—a notable retreat from trends seen earlier this year.

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Thanks to strong inflows and more receptive market conditions, hedge funds set a high water mark in Q1 by surpassing $2 trillion in assets for the first time in history.

But due, in part, to mounting concerns over the European debt crisis and fears of a second economic slowdown in the US, markets suffered steep losses in the third quarter.

Nearly every asset class took a hit, including hedge funds, although their losses were mild compared to some parts of the market (funds lost 6.2 percent in Q3 versus the S&P 500, which lost more than 14 percent during the same period).

Despite the choppy environment, which included headlines of major losses at several large hedge funds (including industry legend John Paulson’s$30 billion Paulson & Co.), investors continued to put their faith, and cash, in the asset class.

Funds saw nearly $9 billion in net inflows, marking the ninth consecutive quarter they’ve benefited from a net boost in fresh capital from clients. Roughly 20 funds saw inflows of $500 million or greater, according to the data.

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