The hedge fund industry largely defied turmoil in the financial markets to grow significantly last year, new data has revealed.
According to a study from industry tracker Hedge Fund Research hedge funds garnered a record $194.4 billion of fresh investment in 2007.
This was some 54 per cent higher than the inflow of $126.5 billion recorded in 2006 - and brings the total assets managed by funds to $1.87 trillion.
However, signs of the impact of the slowdown in the global economy on the hedge fund sector were evident in the fourth quarter when new investment dipped to $30.4 billion - well down from the preceding three periods and a 33 per cent decline from the second quarter.
Chris Jones, chief investment officer at Key Asset Management, which invests in hedge funds, told the Financial Times that the health of the sector could be attributed to customers opting for hedge funds since they offers stability at a time when uncertainty is affecting the financial sector.
He explained: "What it shows is that, despite the fact that hedge funds have been billed as 'shoot the lights out' managers, people haven't forgotten that when things are tough hedge funds can take short positions and build more robust portfolios than any other asset class."
