Hedge Funds Climb Back Across $2 Trillion Threshold

Although it's been well-documented that hedge funds endured a difficult 2011, research shows the industry enjoyed a bit of a comeback as the year drew to a close.

Data from Hedge Fund Research Inc. shows that total capital invested in hedge funds climbed back to $2 trillion to conclude 2011 as net inflows exceeded $70 billion for the year, the most investors have poured into the industry since 2007.

During the fourth-quarter, HFR said performance gains offset a nominal net capital outflow of $127 million, with investors showing a clear preference for macro and relative value arbitrage strategies. In total, nearly 60 percent of all hedge funds experienced outflows during the quarter, with slightly more than 40 percent attracting inflows.

HFR said its data showed investors didn't have an appetite for equity and event-driven hedge funds following a disastrous third-quarter, with both seeing respective fourth-quarter outflows of $8.6 billion and $5.3 billion. On the other hand, macro funds saw net inflows of $7.9 billion during the quarter, while relatively value arbitrage strategies attracted $5.9 billion. HFR president Kenneth Heinz said capital flows during the quarter and full-year indicated that investors increased their exposure across currency, commodity and fixed income strategies as a way to position themselves for continued volatility as the markets remain bedeviled by the European debt and currency crisis. As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio