CHICAGO, Jan. 25, 2011 /PRNewswire/ -- Morningstar, Inc.
(Nasdaq: MORN), a leading provider of independent investment
research, today reported preliminary hedge fund performance for
December and for the year ending Dec.31, 2010 as well as asset
flows through November 2010. The
Morningstar 1000 Hedge Fund Index rose 4.0% in December, resulting
in an increase of 10.4% for the year. The currency-hedged
Morningstar MSCI Hedge Fund Index experienced a 3.0% December boost
and concluded the year up 10.6%. A year-end rally in both stocks
and bonds buoyed the indexes, which have each recovered from their
October 2007 through February 2009 declines.
"Hedge funds finished strongly in 2010, and most have now fully
recuperated from 2008's hangover," said Nadia Papagiannis, alternative investment
strategist for Morningstar.
Distressed securities and corporate event-driven strategies
emerged as winners in 2010. These funds attempt to take advantage
of bankruptcies and restructurings, and 2010 offered many such
investment opportunities, including GM stock, Tribune bonds, and
structured credit. The Morningstar Distressed Securities Hedge Fund
Index rose 3.5% in December and 24.5% for 2010, on par with 2009's
outsized results. The Morningstar Corporate Actions Hedge Fund
Index grew 4.6% in December and 19.4% for the year, a handsome
increase but significantly less than its 29.9% rise in 2009. Merger
arbitrage, one subset of corporate actions strategies, was not as
successful in 2010 as spreads (premiums paid for target companies)
narrowed. The Morningstar MSCI Merger Arbitrage Hedge Fund Index
rose 0.2% in December and 5.2% for the year, compared with a 12.5%
increase in 2009.
Trend-following, or momentum, strategies saw the largest gains
in December. A number of commodity futures, such as copper, cotton,
and coffee, saw sharp upward trajectories during the month, while
short positions in the five-year and 10-year Treasury futures
contracts proved profitable for some hedge funds. Although
trend-following hedge funds also trade equity index futures and
currency forwards, positions in commodity and bond futures
contracts drove returns throughout the year. The Morningstar Global
Trend Hedge Fund Index jumped 7.4% in December, bolstering the
year's 12.3% rise.
Equity strategies, particularly those focusing on developed
Asia and emerging market stocks,
managed double-digit returns in 2010, but the average hedge fund
failed to outperform the broad market indexes as hedging activities
reduced their returns. The Morningstar Developed Asia Equity Hedge
Fund Index climbed 14.6% but fell short of the MSCI AC Asia NR
Stock Index's 17.6% rise in 2010. The Morningstar MSCI Emerging
Markets Hedge Fund Index increased 14.2%, but also failed to match
the MSCI Emerging Markets NR Equity Index's 18.9% climb. Similarly,
the Morningstar U.S. Equity Hedge Fund Index’s 13.4% rise in 2010
was short of the S&P 500's 15.1% increase for the year.
U.S. equity hedge funds in Morningstar's database experienced
net inflows of $1.5 billion through
November 2010, in contrast to
outflows of $8 billion through
November 2009. Other than U.S.
equity, the only other hedge fund categories experiencing
significant inflows through November
2010 were global non-trend (hedge funds that bet on
macro-economic events) and corporate actions. These categories saw
net inflows of $5.4 billion and
$1.6 billion, respectively, through
November. Hedge funds falling into Morningstar's global debt and
global equity hedge fund categories leaked the most assets,
$1.7 billion and $1.0 billion, respectively, in the first 11
months of the year. Overall, however, hedge funds in Morningstar's
database received net inflows of $2.7
billion through November, the fourth consecutive month of
inflows exceeding outflows.
Although single-manager hedge funds appear to be healing in
terms of both asset flows and returns, hedge funds of funds
continued their relative underperformance in 2010. The Morningstar
Hedge Fund of Fund Index rose only 4.1% in 2010, a full 6
percentage points less than single-manager hedge funds. Hedge funds
of funds in Morningstar's database also experienced significant
outflows in 2010 through November, totaling almost $10.1 billion.
December returns for the Morningstar Hedge Fund Indexes are
based on funds that reported as of January
21, 2011. December returns for the Morningstar MSCI Hedge
Fund Indexes and November asset flows are based on funds that
reported as of January 11, 2011.
Hedge fund investors, managers, consultants, and advisors can
access additional information through the Morningstar® Alternative
Investment Center(SM), formerly Morningstar® Altvest(SM), the
company's research platform designed specifically for hedge funds,
or Morningstar Direct(SM), the company's global research platform
for institutions.
Morningstar has approximately 11,000 hedge funds and funds of
hedge funds in its database. The Morningstar 1000 Hedge Fund Index,
a global, broadly representative benchmark for hedge fund
performance, has return history from January
2003. The index comprises the top 90% of eligible assets in
Morningstar's hedge fund database. For the purposes of the index,
Morningstar counts funds with shared portfolios as a single hedge
fund; funds of hedge funds are excluded from consideration. The
index is updated daily for the previous month-end, rebalanced
monthly, and reconstituted semi-annually. In addition, Morningstar
has 17 category indexes and four broad category indexes based on
Morningstar's strategy-specific classification system for hedge
funds. Morningstar's hedge fund indexes are not investable.
In addition to calculating the Morningstar Hedge Fund Indexes,
Morningstar also calculates hedge fund indexes by applying the MSCI
Hedge Fund Index Methodology and Hedge Fund Classification Standard
to Morningstar's hedge fund database. These indexes demonstrate the
performance of hedge funds to investors who have hedged their
currency exposure back into U.S. dollars. The MSCI Hedge Fund Index
Methodology classifies hedge funds by investment process,
geography, and asset class.
This release is not intended to be an offer or solicitation for
the sale of hedge funds. The information is not warranted to be
accurate, complete, or timely. When considering hedge funds,
investors should consider various risks, including the fact that
some products engage in leveraging and other speculative investment
practices that may increase the risk of investment loss, can be
illiquid, are not required to provide periodic pricing or valuation
information to investors, may involve complex tax structures and
delays in distributing important tax information, are not subject
to the same regulatory requirements as mutual funds, often charge
high fees, and in many cases the underlying investments are not
transparent and are known only to the investment manager. The high
degree of leverage that is often obtainable in trading can lead to
large losses as well as gains. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from
any use of this information. Past performance is no guarantee of
future results.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent
investment research in North
America, Europe,
Australia, and Asia. The company offers an extensive line of
Internet, software, and print-based products and services for
individuals, financial advisors, and institutions. Morningstar
provides data on approximately 370,000 investment offerings,
including stocks, mutual funds, and similar vehicles, along with
real-time global market data on more than 4 million equities,
indexes, futures, options, commodities, and precious metals, in
addition to foreign exchange and Treasury markets. The company has
operations in 26 countries.
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Morningstar Hedge Fund Index
Performance
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Dec.
2010
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2010
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Morningstar 1000 HF
USD
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4.04
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10.36
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Morningstar Hedge Fund of
Funds
|
2.93
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4.13
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Morningstar Hedge Fund Category
Indexes
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Morningstar Convtbl Arbitrage HF
USD
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2.42
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8.36
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Morningstar Corporate Actions HF
USD
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4.58
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19.40
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Morningstar Debt Arbitrage HF
USD
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0.24
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10.07
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Morningstar Distressed Sec HF
USD
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3.53
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24.47
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Morningstar Dvlp Asia Equity HF
USD
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5.52
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14.58
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Morningstar EM Equity HF
USD
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3.72
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13.28
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Morningstar Equity Arbitrage HF
USD
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2.03
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2.62
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Morningstar Europe Equity HF
USD
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6.28
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5.99
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Morningstar Global Debt HF
USD
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2.10
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10.78
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Morningstar Global Equity HF
USD
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3.74
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7.38
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Morningstar Global Non Trend HF
PUSD
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2.25
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4.43
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Morningstar Global Trend HF
USD
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7.35
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12.28
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Morningstar Multi-Strategy HF
USD
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3.45
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8.17
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Morningstar Short Equity HF
PUSD
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5.42
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-2.03
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Morningstar US Equity HF
USD
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4.12
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13.41
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Morningstar US Small Cap Eqty HF
USD
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6.18
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12.82
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Morningstar Hedge Fund Indexes
with MSCI
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Morningstar MSCI Composite
AW
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3.04
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10.62
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Morningstar MSCI Composite Core
Funds
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3.47
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10.87
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Morningstar MSCI Composite
EW
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3.42
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11.26
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Morningstar MSCI Composite Small
Fund
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3.31
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11.19
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Morningstar MSCI Developed
Markets
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3.65
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11.48
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Morningstar MSCI Directional
Trading
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4.18
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10.38
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Morningstar MSCI Emerging
Markets
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3.25
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14.19
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Morningstar MSCI
Europe
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3.56
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11.11
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Morningstar MSCI Global
Markets
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3.07
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10.09
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Morningstar MSCI
Japan
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4.80
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2.72
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Morningstar MSCI Merger
Arbitrage
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0.23
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5.18
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Morningstar MSCI Multi-Process
Group
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3.08
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11.69
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Morningstar MSCI North
America
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3.29
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12.39
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Morningstar MSCI Relative
Value
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0.98
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8.08
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Morningstar MSCI Security
Selection
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3.93
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12.09
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Market Indexes
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S&P 500 TR
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6.68
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15.06
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MSCI EM NR USD
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7.14
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18.88
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MSCI AC Asia NR USD
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6.50
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17.55
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MSCI Europe NR USD
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8.39
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3.88
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BarCap Global Aggregate TR
USD
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1.31
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5.54
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DJ UBS Commodity TR
USD
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10.69
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16.83
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Est. Hedge Fund Flows By
Morningstar Category
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Nov. 2010
Flows
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YTD Through
Nov.
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Convertible Arbitrage
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114,704,416
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367,574,122
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Corporate Actions
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111,711,090
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1,553,248,862
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Debt Arbitrage
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242,101,712
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(16,267,245)
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Developed Asia Equity
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35,193,694
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(463,637,381)
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Distressed Securities
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889,974,713
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(299,267,349)
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Emerging Market
Equity
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235,241,938
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(289,838,362)
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Equity Arbitrage
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(68,019,620)
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(543,820,152)
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Europe Equity
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107,564,340
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(842,960,785)
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Global Debt
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7,607,368
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(1,693,729,128)
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Global Equity
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(64,097,828)
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(1,022,667,174)
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Global Non-Trend
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674,328,864
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5,414,419,851
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Global Trend
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550,137,591
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(611,331,686)
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Multi-strategy
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569,505,619
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(236,850,552)
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Short Equity
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528,462
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17,117,048
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U.S. Equity
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299,348,129
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1,498,349,288
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U.S. Small Cap Equity
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94,691,898
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(170,531,655)
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UnClassified
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(1)
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(692,270)
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TOTAL SINGLE-STRATEGY HEDGE FUND
FLOWS
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3,800,522,385
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2,659,115,432
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Est. Flows by Morningstar
Rating
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1-star
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362,213,028
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(112,945,473)
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2-star
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76,280,536
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(2,785,297,968)
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3-star
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463,901,907
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(1,484,953,579)
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4-star
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440,733,685
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5,812,772,417
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5-star
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1,825,707,807
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3,700,020,080
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No Rating
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631,685,422
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(2,470,480,045)
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TOTAL SINGLE-STRATEGY HEDGE FUND
FLOWS
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3,800,522,385
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2,659,115,432
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©2011 Morningstar, Inc. All rights reserved.
MORN-R
Media Contact:
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Alexa Auerbach, 312-696-6481
or alexa.auerbach@morningstar.com
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SOURCE Morningstar, Inc.