Hedge Funds To Face Fresh Wave Of Redemptions

Date: Tuesday, March 3, 2009
Author: Joe Weisenthal, Business Insider.com

The economy's gotten worse, the stock market has tanked further, and a host of new scams have been turned over. Yep, nothing that's happened in the last quarter has made investors any more inclined to be invested in hedge funds. Thus, funds can expect a fresh round of crippling redemption requests:

WSJ: Among the managers expecting withdrawals are New York-based D.E. Shaw & Co. and Och-Ziff Capital Management Group LLC, which together manage more than $50 billion in assets. Huw van Steenis, an analyst at Morgan Stanley in London, says he has seen "no deceleration" in investors' requests to pull money out of hedge funds. As a result, he estimates that assets under management in the global hedge-fund industry will shrink by as much as 30% this year due to withdrawals, following a 20% decrease in the second half of last year. That will leave total assets at less than $1 trillion, down from their peak of more than $1.9 trillion in mid-2008.

With hedge funds AUM down nearly 50% from its peak, we wonder if the only investors left are pension funds and the like that are flailing desperately from some kind of outsize return in order to meet retiree guarantees. They know that plain vanilla long investing, or conservative T-bill investing has no hope of getting them, so trudge on with hedge funds they must.

And it's not all bad news for these funds: Across the board they were flat in January, which makes a big turnaround from last year.