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July 31, 2002

Alternative Vehicle Booms

By Gregory Bresiger

One part of the trading world is going through anything but lean times. Actually, these are great times for a once unpopular vehicle.

Hedge funds continue to take in billions of dollars in new money as trading in traditional vehicles is plummeting. That's the report of a group that follows the hedge fund industry.

"Things are booming in this business," said Annette Bronkesh, a spokeswoman for Tremont Advisers, a Rye, New York firm that tracks the industry.

Bronkesh said investors added some $5.6 billion in new assets to hedge funds in the first quarter. That was down from the previous quarter, when hedge funds took in a record $8.8 billion of new money. But the numbers indicated that investors still like these funds, which are supposed to shine in the midst of a bear market storm.

Making It Pay

Investors, according to one Tremont Advisers official, are wary, but are leaning toward funds that are designed to benefit from bad times in the market.

"The first quarter appears to have been a time when hedge fund investors were moving cautiously and reevaluating their investments," according to Patrick Kelly, director of manager research at Tremont Advisers. He noted that the best performing category of hedge funds is event driven. These funds are designed to make money by buying distressed securities at a huge discount.

"More investors were on the sidelines and those committing funds continued to lean toward strategies that could benefit from today's uncertain market environment. Thus, it was no surprise that distressed strategies were particularly popular again in the first quarter," Kelly said.