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Top Hedge Funds Reopen to New Investors: Partners

Date: Thursday, October 9, 2008
Author: Laurence Fletcher, Thomson Reuters.com

The credit crisis is providing a rare chance for investors with sufficient cash to get into previously inaccessible hedge funds, according to Swiss-based Partners Group's head of fund manager selection Roberto Cagnati.

Top hedge funds, which gathered all the assets they needed in the boom times of recent years and then closed their doors, are once again seeking new investors as redemptions across the industry soar in the face of poor performance. This opens up a rare, and potentially narrow, window of opportunity for asset allocators willing to brave volatile markets and with enough cash—perhaps more than $500,000—to invest.

"Hedge fund land has really changed in terms of supply and demand of investors. There's almost no closed fund at this point," Mr. Cagnati told Reuters in an interview on Tuesday [Oct. 8]. "You get calls from guys you'd never talked to before. There's really no guy we couldn't meet—it's a good opportunity to build relationships. (However) it's likely to change again at some point."

Hundreds of billions of dollars have poured into the $2.6 trillion hedge fund industry in recent years as investors chased portfolios they thought able to make money in all markets. However, performance has suffered as the credit crisis has taken hold—Hedge Fund Research's closely-watched HFRI index fell 4.68% in September, taking the index's year-to-date loss to 9.41%—and investors have begun to ask for some of their money back.

Mr. Cagnati also said that many hedge funds are sitting on cash to meet expected investor redemptions and are unwilling to make big investments after last month's terrible performance. "September we estimate to be the worst month ever. People are preparing for redemptions, that's why they're reducing positions," he said. "Hedge funds' directional market exposure is very low. [They] are not moving back into the market. There is a ton of opportunity. But markets are at levels that managers said a few months ago they'd never [get to]."

By Laurence Fletcher