Investors back hedge funds amid turbulence

Date: Friday, August 19, 2011
Author: Laurence Fletcher, Reuters

* Forward redemption index 2.71 pct vs 2.08 pct in July

* Third lowest reading this year

* Hedge funds lose money this year but outperform stocks

LONDON, Aug 18 (Reuters) - Investors are largely sticking with hedge funds to guide them through the summer's highly volatile markets, data showed on Thursday, despite lacklustre performances so far this year from these freewheeling portfolios.

The GlobeOp Forward Redemption Indicator -- a monthly snapshot of clients giving advance notice they want their money back as a percentage of GlobeOp's assets under administration -- was 2.71 percent, the third lowest figure seen this year.

Whilst up from July's 2.08 percent, it is still well below the 4.01 percent seen in June and well below the 19.27 percent recorded in November 2008 shortly after the collapse of Lehman Brothers.

"Where do investors put their money?" GlobeOp CEO Hans Hufschmid told Reuters. "There's fixed income, but the Federal Reserve said we'll have close to zero interest rates for the next two years. That leaves equities or hedge funds, which are as good a place to be as any."

Hedge funds have failed to make much headway this year, amid market-moving events from the Japanese earthquake to the eurozone debt crisis.

Many have also been hit hard by August's market sell-off -- Hedge Fund Research's HFRX index, for instance, is down 5.05 percent year-to-date.

However, this is still well ahead of the FTSE 100 index, which is down 14 percent so far this year.

GlobeOp, an independent fund services firm whose data covers $170 billion of assets under administration, took its monthly snapshot of hedge fund redemption requests on Aug. 16.