Hedge fund redemptions down, FoHF withdrawals up

Date: Friday, April 24, 2009
Author: HedgeFunds Review

Investors continued to withdraw capital from hedge funds in the first quarter of 2009, redeeming nearly $104 billion, according to data released by Hedge Fund Research. In the same period withdrawals from the fund of hedge funds (FoHF) industry totalled $85 billion.

FoHFs, which experienced a record performance decline of 21.3% in 2008, posted a performance gain of 0.47% in the first quarter of 2009, in line with overall industry performance.

Partially offsetting the industry asset decline, the HFRI Fund Weighted Composite Index posted a gain of 0.53% for the first quarter, resulting in a performance-based gain for the industry of approximately $28 billion.

Total hedge fund industry capital declined to $1.33 trillion at the end of the first quarter 2009, $600 billion below the industry asset peak at the end of the second quarter of 2008 and $75 billion below the year-end 2008 asset total.

Capital invested in FoHFs declined to just over $525 billion, $300 billion below its peak, at the end of the second quarter 2008 and $68 billion below year-end 2008.

Extreme investor risk aversion subsided in the first quarter of 2009 although it remained at elevated historical levels as industry consolidation continued. "In addition to performance investors are focused on structure and transparency, and the industry is in the process of evolving to meet these demands," said Kenneth Heinz, president of Hedge Fund Research.