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Hedge fund assets seen rebounding

Date: Tuesday, October 6, 2009
Author: Laurence Fletcher, Reuters

Global hedge fund industry assets could recover by 10 percent or more during the second half of 2009, according to one data provider, after a tough first half in which investors continued to pull out their cash.

HedgeFund Intelligence (HFI) said on Monday there were signs investors were beginning to put money back into hedge funds, while continued performance gains in the third quarter would also boost asset levels.

"We would not be surprised to see industry assets rise from the mid-year levels by at least 10 percent before the end of 2009," said HFI editorial director Neil Wilson.

There are already signs that hedge fund firms are beginning to recover from a tough 12 months.

Last week, Man Group (EMG.L) said net client withdrawals slowed in the third quarter, helping to lift asset levels, while GLG Partners (GLG.N) recently said it had seen net inflows.

During the first half of this year total global hedge fund assets fell 8.5 percent to $1.67 trillion (1.05 trillion pounds), HFI said. That came even though funds on average gained 7.2 percent in performance terms, according to Credit Suisse/Tremont.

The data indicates that investors continued to pull their money out of hedge funds in the first half, perhaps in reaction to the industry's worst year of performance on record last year when funds lost close to 20 percent on avaerage.

"This implies that net redemptions from hedge funds were continuing at a fairly rapid rate between January and June, with as much as 15 percent of investor money being pulled from the industry during the first half," HFI said in a statement.

Total industry assets are now down 38 percent from their peak of $2.7 trillion in the first half of 2008.

Meanwhile, the data also shows that London's share of hedge fund firms running more than $1 billion dipped below 15 percent from more than 17 percent in the first half, while New York's share is almost unchanged at just under 47 percent.

The total number of firms globally running more than $1 billion in assets was 291 at the end of June, down from 311 at the start of the year and 395 a year ago.