Investors cut back on hedge funds despite rally-data

By Tommy Wilkes

LONDON, Oct 10 (Reuters) - Hedge fund clients pulled outmore money than they put in over the past month in spite of astrong performance, in a possible sign of nerves that theparlous state of major economies could hit their returns.

Net outflows from hedge funds, as measured by the SS&CGlobeOp Capital Movement Index, which tracks monthly netsubscriptions to and redemptions from funds, were 0.67 percentof the total during the month to October 1.

The withdrawals are only the third month of net outflowsthis year - July's figure showed net outflows of 1 percent whileJanuary's figure saw investors withdraw 0.71 percent of thetotal - and come during a month when most hedge funds mademoney.

"Inflows have remained steady, while outflows have spiked inline with quarter-end rebalancing," Bill Stone, Chairman andChief Executive Officer at SS&C Technologies, said.

October's figure is affected by investors rebalancing theirportfolios at quarter-end, but the same month in 2011 and 2010saw inflows of 0.3 percent and 1.12 percent respectively.

Hedge funds ended the third quarter strongly afterequity-focused managers jumped on rallying stock markets andcredit funds made further gains betting on U.S. mortgage-backedsecurities.

The SS&C GlobeOp Hedge Fund Performance Index rose 1.11percent during September, bringing 2012 gains to 7.96 percent.

Although the rise will be welcomed by the industry, comingafter the average fund ended last year in the red for the secondyear of negative performance in four, hedge funds still trailstock indexes such as the S&P 500, which is up some 16 percent.

The relatively poor performance has not always deterredinvestors over the past year, however.

The Capital Movement Index reached an all-time high at thestart of September, underlining how more investors are turningto hedge funds instead of traditional equity and bondinvestments.

SS&C GlobeOp's data covers around $187 billion of hedge fundassets under administration, or around 8 to 10 percent of theglobal hedge fund industry.

(Editing by Laurence Fletcher and Greg Mahlich)

((thomas.wilkes@thomsonreuters.com)(+44 207 542 0067)(ReutersMessaging: thomas.wilkes.thomsonreuters.com@reuters.net))