Hedge funds are starting to see positive returns and fewer redemptions, yet overall assets continue to decline, HedgeFund.net (HFN) says.

The firm reports that estimates for March indicate investor outflows continued, but the rate of redemptions decreased for the third straight month. “The slowdown signals near term net redemptions may be coming to an end,” it suggests.

Nevertheless, HFN also reports that hedge fund assets likely fell by an additional 1.01% in March to US$1.724 trillion; and are now down 41% from their peak in June 2008. Net redemptions and liquidations in March were an estimated US$23.97 billion compared to investor outflows of US$41.14 billion in February and US$165.25 billion in December.

In the first quarter, hedge fund assets fell an estimated 10.78%, or US$208.36 billion, it observes. Redemptions accounted for a US$217.75 billion reduction in assets, and liquidations accounted for an estimated US$12.61 billion, whereas performance delivered an increase of US$22.01 billion.

On the performance side, with 1,395 funds reporting, the HFN Hedge Fund Aggregate Average shows funds returning 1.84% for March and 0.52% for 2009, compared to -11.01% for the S&P 500 Total Return Index.

“March performance was primarily driven by surging global equity markets, but the fact that long only strategies were well below broad equity indices is an indication managers maintained a cautious approach,” it says. “The biggest drag on performance, apart from short-biased funds, were CTA/managed futures products focusing on foreign exchange markets. The announcement on March 18 that the U.S. Treasury would significantly expand its balance sheet resulted in sharp exchange rate movements which negatively impacted many of these managers.”

Funds investing in emerging markets benefited most in March and the surge pushed the HFN Emerging Markets Average positive for the year, HFN also says.

IE