Hedge fund exit requests running at seasonal norms

Date: Wednesday, December 21, 2011
Author: Yeganeh Torbati, Reuters

More clients asked for their money back from hedge funds in December than in the rest of 2011, in line with the traditional year-end evaluation of funds' performance after a year marked by high volatility and erratic returns, data shows.

The GlobeOp Forward Redemption Indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of GlobeOp's assets under administration, measured 4.58 percent this month, up from 3.44 percent in November.

"The month-on-month increase is within the normal range of a seasonal pattern, as investors prepare to rebalance their portfolios at year end," said Hans Hufschmid, chief executive officer of GlobeOp Financial Services, in a statement.

Hedge funds are closing a year in which they have largely failed to deliver impressive returns, with volatile markets making it difficult to time their bets or hold onto gains.

The average hedge fund is down 4.45 percent in the year to Dec. 15, according to Hedge Fund Research.

Investors gave notice to withdraw 4.59 percent of assets under administration in December 2010, almost the same as this year. The previous high for redemptions in 2011 was in June, at 4.01 percent.

Forward redemptions as a percentage of GlobeOp assets under administration have dropped significantly since hitting a high of over 19 percent in November 2008, shortly after the collapse of U.S. investment bank Lehman Brothers.

While the volume of redemption notices have risen, a separate indicator by GlobeOp released earlier this month showed hedge funds were still seen as crucial ingredients of a rounded, diversified portfolio.

The sector recorded higher cumulative net subscriptions in December than at any time since Lehman's collapse, as investors turn to alternative strategies to ride out volatile markets.