December's $2.3 billion inflow to hedge funds is lowest in two years, according to TrimTabs and BarclayHedge

By Paul A. Harris

St. Louis, Feb. 6 - TrimTabs Investment Research and BarclayHedge reported on Wednesday that all hedge funds posted an estimated inflow of $2.3 billion in December - the lowest inflow in two years.

"Flows tend to follow performance, and hedge funds are no exception," said Charles Biderman, chief executive officer of TrimTabs.

"In November, hedge funds lost 1.7%, which was their worst performance since September 2001. In December, the inflow into hedge funds was the lowest in two years."

Breaking out the estimated $2.3 billion inflow into all hedge funds in December, funds of hedge funds received an estimated $9.5 billion, while investors pulled out an estimated $7.1 billion from hedge funds directly.

The most popular category was emerging markets, which posted an estimated inflow of $4.4 billion, or 0.8% of assets.

"Amid the market turbulence in December, emerging markets hedge funds rose 1.5%, far outperforming the MSCI Emerging Markets index," said Sol Wacksman, CEO of BarclayHedge.

By contrast, merger arbitrage was the least popular category, posting an estimated outflow of $2.7 billion, or 7.7% of assets, the third consecutive outflow.

"Declining merger activity and numerous merger cancellations have clouded the outlook for merger arbitrage," Wacksman said.

In 2007, all hedge funds took in $257 billion, which was 37% higher than the $187 billion inflow into equity mutual funds. The most popular categories were multi-strategy, which received an estimated $56.8 billion, or 25.5% of assets, and emerging markets, which received an estimated $41.7 billion, or 13.7% of assets.

The only category posting an outflow was equity long/short, which lost an estimated $700 million, or 1.2% of assets.

According to data furnished by TrimTabs and BarclayHedge, December's meager $2.3 billion inflow follows a much more substantial $21.8 billion inflow for November.

All of the months of 2007 saw positive flows.

Prior to December, the smallest was that of October, which saw an inflow of approximately $11.57 billion.

The largest monthly flow was approximately $40.18 billion, in April.

The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis, and the TrimTabs Hedge Fund Flow Report provides detailed analysis of these flows.

Further information is available at http://www.barclayhedge.com/products/trimtabs-hedge-fund-flow-report.html.

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