Obviously firm failures, government scrutiny and the like have had little impact on investors’ hunger for hedge funds. According to Hedge Fund Research, more than $44.5 billion poured into the industry in the third quarter, bringing the total for the year so far to $110.6 billion, more than double all of last year, and even crushing the previous annual record of $99.4 billion in 2002. The 3Q figures broke the quarterly net-deposits record set in the second quarter, when $42.1 billion entered the industry, and the biggest inflow since early 2003. The question is whether it will continue. The question is whether it will continue. Josh Rosenberg, president of HFR, told Bloomberg News, “Given the relationship we’ve seen of flows following returns, coupled with a skeptical tenor in the hedge fund industry, we may very well see lighter flows in the fourth quarter.” According to HFR figures, hedge funds have averaged returns of a measly 1% for the combined second and third quarters of 2006, while the S&P500 has grown 4% and the Lehman Brothers Aggregate Bond Index is up 3.7%. HFR calculates total industry assets as of Sept. 30 at $1.34 trillion. Multistrategy funds saw the single most money, a net $9.8 billion, followed by stock funds at $8.9 billion. Funds of hedge funds attracted $123.8 billion.
