New Years Resolution: Get Out Of Hedge Funds

Date: Thursday, December 4, 2008
Author: Robert Reed, BNET.com

The hedge fund industry is bracing for a massive “end-of-the-year” sale as jittery investors opt to stash their cash in safer places.

Hedge fund redemptions are expected to accelerate in December as many clients have already given the 30-day notice many hedgies require before exiting.

Some hedge fund managers were praying that brisk late November and “Black Friday” retail sales would ease investor worries about the economy and stave off redemptions. That didn’t happen.

Already the hedgies are reeling from historically high redemptions, dropping by $210 billion in the first nine months of this year and lowering total industry assets to $1.72 trillion, according to data released by Hedge Fund Research.

Among the U.S.-based hedge funds feeling that pain: Chicago-based Citadel Investment Group. Its major Kensington and Wellington hedge funds suffered a 35 percent asset drop earlier this year. Citadel now has about $16 billion in assets under management, down from nearly $20 billion earlier this year.

Nearly 4,000 of the estimated 9,000 U.S. hedge funds are expected to fade away in the next few years, say industry experts, and about 10,000 hedge fund-related jobs will be lost.

Despite the rough times, some hedgies are trying to fight back by cutting fees and seeking to “lock up” customers for longer timespans.

While some canny hedgies will survive, most industry experts agree on one thing: The hedge fund heyday officially ended in 2008.

Bob Reed has spent more than 25 years as a reporter, editor, columnist and analyst for major publications and news organizations including Bloomberg, Crain's Chicago Business and WBBM Newsradio 780.