The hedge fund industry posted an inflow of USD3.8bn (0.2 per cent of assets) in September 2010, the third straight inflow as well as the sixth in eight months, according to TrimTabs Investment Research and BarclayHedge. 

Assets surged 2.5 per cent to USD1.62trn, the highest level since April.

“September was a good month for hedge fund managers,” says Sol Waksman, founder and president of BarclayHedge. “Nine in ten managers reported a profit for the month, and our hedge fund index increased 3.5 per cent. This is the largest gain since May 2009, and it lifted the index above the October 2007 high-water mark.”

Hedge fund investors were risk averse in September. Equity long only funds redeemed USD829m (1.2 per cent of assets), the heaviest outflow of all fund strategies, while emerging markets funds redeemed USD269m (0.1 per cent of assets), the third outflow in four months. 

Meanwhile, commodity trading advisers hauled in USD5.8bn, the sixth straight inflow as well as the 14th in 16 months. 

In contrast, funds of hedge funds redeemed USD635m (0.1 per cent of assets).

“It won’t surprise us to see hedge fund managers investing aggressively through year-end, which could keep a strong bid under stock prices,” says Vincent Deluard, executive vice president at TrimTabs. “Investors have poured USD16.1bn into hedge funds in the past three months, and managers need to put that fresh cash to work. Also, more than half of managers have failed to poke through their previous high-water marks. In order for these folks to collect performance fees this year, they need to lever up and produce a blockbuster quarter.”

Hedge fund investors continue to pour into debt. Fixed income hedge funds posted an inflow of USD1.3bn (0.7 per cent of assets) in August, the fifth straight inflow. Fixed income funds boast a year-to-date return of 9.6 per cent, far and away the best performance of any hedge fund strategy.

“Fat fixed income inflows could persist for months even though bond ETFs and mutual funds have sucked in a staggering USD710bn since the start of 2009,” adds Deluard. “The Fed just announced it will load up on Treasuries to the tune of USD900bn through Q2 2011, and it’s a rare treat for investors to be able to piggyback a Fed trade policymakers are telegraphing so clearly.”