AllAboutAlpha.com makes an interesting point about the recent inflows we've see into hedge funds: Inflows may not strictly be correlated with strong performance.

While the conventional wisdom holds that strong performance attracts fund investors, the equation doesn't always hold. To be sure, the conventional wisdom holds in some areas. Fixed income funds, for example, "have posted an inflow in 13 of the last 14 months. Their YTD inflow is $14.6 billion, the heaviest of any of the hedge fund strategies. Fittingly, fixed income hedge funds have been very successful in recent months, returning 3.6 percent in 2011 to date, the best performance by strategy for that period."

But the correlation falters when you look at other categories and geographies. An interesting example is funds of hedge funds, which have not fared well from an inflow point of view.

"They took in only $631 million in August, which is only 0.1 percent of their assets, and that was coming off the negative inflows of both June and July."

And yet their performance has been relatively strong. Obviously, this could be a statement about the funds of funds business model, which may be striking some as bit passé right now. At the other end of the stick, emerging markets have racked up huge inflows, though the niche's performance has been middling at best.

For more:
- here's the article

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