Stock Hedge Funds Post Record Inflows

Hedge funds that invest in stocks took in a net $13.5 billion in the second quarter, a record, with many of the new investors apparently focused on reducing their portfolio volatility, data released Monday showed.

TASS Research, a unit of New York-based hedge fund group Tremont Capital Management Inc., said so-called long/short equity funds attracted the bulk of all money sent to these loosely regulated investment pools, which promise better returns than traditional funds.

In the first three months of the year, long/short equity funds took in a net $8.2 billion. In the second quarter of 2003, they took in $1.6 billion.

Long/short funds attempt to make money by buying attractive stocks while “shorting” others that the fund manager believes are primed to decline. The strategy often is pitched as a way to generate market-beating returns with lower-than-average volatility.

TASS data also showed that hedge funds attracted a net $43.3 billion in assets, a record, into all types of strategies in the second quarter, up from $38.2 billion in the first quarter.

TASS estimated total hedge fund assets at $870 billion.

Hedge funds once were reserved for very wealthy investors, but more and more average investors are getting a taste of them. Also, public pension funds have shown an increasing appetite for hedge funds.