Hedge-fund managers stockpile cash – and so do hedge fund investors

Date: Tuesday, May 6, 2008
Author: WSJ.com

Deutsche Bank Survey:

From the WSJ: In times of market turmoil and economic uncertainty, nothing comforts a hedge-fund investor like good, old-fashioned cash.

It isn't a secret that hedge-fund managers are sitting on a big stash waiting for the right time to buy distressed assets. Less discussed is the cash that hedge-fund investors -- wealthy individuals, pension funds and fund-of-hedge-fund managers -- have waiting in the wings.

This second, fat layer of hoarded cash is one of the most prominent sentiments to emerge in the 2008 Alternative Investment Survey by Deutsche Bank AG. The sixth annual report, due out Tuesday, provides a barometer of about 1,000 institutional money managers and rich investors around the globe with discretion over some $1 trillion in hedge-fund allocations.

Clinging to Cash
This year, watchful waiting sets the tone. Almost a third of the respondents said they are holding cash levels typically equaling between 5% and 10% of their hedge-fund portfolios, which the study's authors described as an unprecedented level of spending restraint.

A usual level of cash would be 1% to 3% of a portfolio, according to Deutsche Bank. That would indicate that as much as $75 billion is sitting on the sidelines… Full article and 2008 Alternative Investment Survey by Deutsche Bank is available via pdf.