Hedge Funds

Churn rate drops, but fund of funds suffer net outflows

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An analysis by Morgan Stanley shows the strategic reallocations of capital by investors among their existing deployments decreased to $3 billion in the third quarter after reaching a recent high of $8.9 in the second quarter just as funds of funds suffered net outflows for the first time in three years.

This churn rate hit $8.9 billion in the second quarter as funds of funds scrambled to eke alpha out of existing investments. Their fear of underperformance was apparently justified, as $1.2 billion left funds of funds, which had pulled in a combined $12.9 billion in the first two