(Reuters) - Investors pulled out around five times more cash from hedge funds in the month to October 1 than in the prior period, during one of the most turbulent few weeks for stock and bond prices since the 2008 financial crisis dampened appetite for risk.
Gross outflows, as measured by the GlobeOp Capital Movement Index, which tracks monthly net subscriptions and redemptions from hedge funds running around $170 billion (109 billion pounds) of assets, hit 3.17 percent last month, the fourth time gross exits topped 3 percent in 2011.
Withdrawals from hedge funds had fallen to 0.58 percent in the month to September 1, the lowest level since before the credit crunch as investors swapped traditional 'safe havens' like the Swiss franc and gold in favour of portfolios expected to make money in all seasons.
GlobeOp's index showed hedge fund inflows were still net positive, rising 0.31 percent in the month to October 1 on the back of a 3.48 percent gross influx of capital.
"Hedge fund investors remain committed," said Hans Hufschmid, chief executive officer of GlobeOp Financial Services. "After a double-digit decline in equities over the quarter, alternative investments continue to hold their attraction."
The $2 trillion hedge funds industry faces an uphill struggle to deliver an average positive annual return in 2011 against a backdrop of unprecedented stress in euro zone sovereign debt markets and equity market falls triggered by fears of a new global recession.
The average fund lost 2.8 percent in September, putting it down 4.7 percent for the first nine months, according to Hedge Fund Research's HFRI index.
(Reporting by Sinead Cruise; Editing by Dan Lalor)