For the first time in a decade, more money flowed out of hedge funds in a quarter than came in. According to Hedge Fund Research, HFs saw a net outflow of $824 million in the fourth quarter of 2005, thus bringing the total of new assets to about $47 billion in 2005, a sharp decline from 2004’s $73.6 billion in new money and $70.6 billion in 2003. Funds of hedge funds saw $2.1 billion drain from their coffers, the second losing quarter in a row. FoHF ended the year with net new assets of $9.5 billion, in contrast to $33 billion in 2004, and $59.4 billion in 2003.
HFR also reports that equity hedge and event-driven strategies brought in the most money, more than $13.5 billion each, while the biggest strategy gainer by percentage was high yield fixed-income, up 30%. Energy was the best performing sector, climbing 23.48%, with assets in the sector surging 121.8% in 2005. Equity hedge is still the single largest strategy, accounting for 30% of the industry’s total $1.105 trillion in assets. In a related matter, currency hedge funds suffered their worst year in three, rising only 2.7% in 2004, compared with 3.9% in 2004 and 12.9% in 2003, according to Deutsche Bank‘s FXSelect Database, as a result of a surprising rise in the U.S. dollar.