May 21 (Bloomberg) -- Hedge funds attracted $15.4 billion in April, the biggest inflow in nine months, as managers had their best performance in more than three years on surging global stock prices, according to Eurekahedge Pte.

Gross inflows to the industry were the largest since August, based on preliminary estimates, according to Ankur Samtaney, an analyst at the Singapore-based research firm. The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds globally, gained 3 percent in April, bringing its year-to-date advance to 3.9 percent, based on 70 percent of the funds reporting, the firm said in a report.

Hedge funds benefited as global stocks surged 11 percent in April, as measured by the MSCI World Index of shares in 23 developed nations. Fund managers are beating global benchmarks in 2009 after suffering the worst year on record in 2008.

“The inflow back into hedge funds was to be expected in light of the current market rallies across the world,” said Rory Kennedy, chief operating officer of United Managers Japan Inc., a Tokyo-based hedge fund adviser. “The last nine turbulent months have forced numerous hedge funds to close, leaving the remaining managers with more opportunities to profit from mispricings and from short-term trends.”

Last month’s gain was the biggest since the index rose 3.4 percent in January 2006. Eurekahedge’s global index slid 12 percent last year, the most since the firm began tracking data in 2000.

‘Golden Age’

Stocks rallied in April as investors speculated the worst of the global recessions is over. The Federal Reserve on April 29 said the “economic outlook has improved modestly” since March, while Japan’s industrial output rose for the first time in six months at twice the pace predicted by economists. U.K. consumer confidence climbed to the highest level in a year.

“We’re entering a golden age for returns, with hugely dislocated and inefficient markets providing great opportunities,” said Peter Douglas, principal of GFIA Pte, a Singapore-based hedge-fund consulting firm. “Now, as there’s some stability in the financial system, managers are putting more risk out and posting bigger numbers.”

Net investor redemptions totaled $25 billion in April, after $40.5 billion of withdrawals offset allocations to the industry, Eurekahedge said. Still, the pace of redemptions slowed as the April figure compared with a monthly average of $65 billion for the preceding six months, the firm said. The funds attracted $12 billion in March based on preliminary figures, Eurekahedge said.

‘Too Early’

Industry assets were $1.3 trillion at the end of April, after falling 10.5 percent in the first quarter, and compared with the peak of $1.95 trillion in June 2008.

For the second consecutive month, small funds with assets under $100 million outperformed larger funds with more than $500 million, returning almost twice as much, Eurekahedge said. Small funds returned 3.3 percent and bigger ones 1.7 percent.

“We’re starting to see some interest from local institutions to invest in our funds,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. “Stability in the global markets have prompted some investors to reduce their cash positions, and the worst seems to be over for now.”

Kikuchi’s Myojo Japan Long Short Fund, which invests in Japanese stocks using a strategy that tries to benefit from rising and falling share prices, returned 4.1 percent in April in yen terms, bringing its year-to-date advance to 13 percent.

Still, “it’s too early to say that we’re seeing long-term money coming back to the industry,” Kikuchi said.

A large portion of investor withdrawals in April came from fund of hedge funds, which have underperformed single-manager funds, Eurekahedge said.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net

Last Updated: May 20, 2009 22:11 EDT