Bumper hedge fund returns this year have helped lift client money flows back to pre-crisis levels, according to hedge fund services firm GlobeOp, marking a rehabilitation for an industry that saw clients flee last year.
GlobeOp Financial Services chief executive Hans Hufschmid said clients had seen a rebound in flows on both a gross and net basis to average levels seen before turmoil struck markets last year.
Hufschmid, whose firm offers administration, risk reporting and technology to funds with a total of $106 billion under management.
His comments on a recovery in hedge fund money flows come after the industry posted record losses of 19% in 2008, and after some funds infuriated clients by locking up their money just when liquidity was most needed.
However, hedge funds have enjoyed a bumper year in 2009 as asset prices rebounded, with the average fund up 17,5% to November, according to Credit Suisse/Tremont.
Data from Hedge Fund Research shows that after withdrawing a net $330 billion from the industry in the year to June, investors gradually returned in the third quarter with a net inflow of $1,1 billion.
In contrast, hedge funds saw around $60 billion of net inflows in both the first and second quarters of 2007, immediately prior to the onset of the credit crisis.
The improved environment and a sustained return of client money has also provided a filip for those seeking to launch new hedge funds, said Hufschmid, a former partner at LTCM, the hedge fund which collapsed in 1998 and received a $3,5 billion bailout to avert widespread financial chaos.
Of 22 new clients GlobeOp added in the second half of 2009, 17 were new hedge funds, a spokeswoman said.
Hufschmid said he was seeing new funds starting up in strategies such as distressed debt and fixed income. Last week, Fortress Investment Group chief executive Daniel Mudd said demand for hedge funds was especially strong in distressed and global macro, and Fortress was raising money for distressed portfolios.
GlobeOp said on Thursday its assets under administration had grown 28% between June 30 and November 30.