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.
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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