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Hedge Fund Assets Hit 16-Month High

NEW YORK (TheStreet) - Hedge fund assets reached a 16-month high of $1.5 trillion, according to data released on Monday.

The hedge fund industry took in $16.6 billion, or 1.1% of assets, in February 2010, researchers at TrimTabs Investment Research and BarclayHedge found.

"Hedge funds sport a stellar win streak, and the average fund outperformed the S&P 500 last year," said Sol Waksman, founder and president of BarclayHedge. "Money is chasing performance."

Hennessee Group, an adviser to hedge fund investors, reported on Friday that the average hedge fund is up 3.05% in March after delivering its best performance with a 20% gain in 2009. "The financial markets seem to have quickly forgotten about sovereign risk and concerns about central bank exit strategies. Investors remain willing to assume greater levels of risk, and equity markets rallied sharply in March," said Charles Gradante, co-founder of Hennessee Group. "However, as the second quarter begins, hedge fund managers are generally cautious. Their key concern is that the Fed is moving forward with its plans to end and eventually reverse its easing of credit."

According to the TrimTabs/BarclayHedge report, distressed securities funds posted the biggest inflow (4.2% of assets) in February. Emerging markets funds lost money (0.1% of assets) for a second straight month, despite returning 65.6% in the past year. Funds of hedge funds continued to perform poorly.

"Funds of funds have underperformed the industry by a fat 13.9% in the past year," said Vincent Deluard, Global Equity Strategist at TrimTabs. "And as a consequence, they continue to bleed assets - $17.4 billion in the past three months."

Researchers at TrimTabs looked into hedge fund flows and returns by country. They found that Canadian and Chinese funds performed the best in the past decade, while funds in Japan and Switzerland performed the worst. Britain boasts the best returns for emerging markets funds.

"The U.S. portion of the industry sank to 60% in the past 10 years," Deluard noted. "We're losing market share. The hedge fund industry has gone global."

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