Hedge fund exit requests seen stable in coming months

Date: Friday, April 19, 2013
Author: Clare Hutchison, Reuters

Client demands to pull money out of hedge funds fell in April and are expected to remain at a steady level in the coming months as investors wait to see how funds cope with the continuing European debt crisis.

Hedge fund administrator SS&C GlobeOp's forward redemption indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of assets under administration, stood at 2.95 percent in April.

This was its lowest since January and a marked decline from March, when it reached 4.33 percent on concern that Cyprus would default following a banking crisis.

The figure was in line with historic averages though slightly higher than the 2 percent reading of April last year. Bill Stone, chairman and chief executive of SS&C Technologies, said this was down to greater liquidity in hedge funds.

"Redemptions are a little bit ahead of this time last year but I think that alternatives (alternative investments) are now a bigger part of people's savings so you're going to see more redemptions than you might have expected."

Hedge funds have profited from a sharp rally in financial markets since last summer, but some investors are disappointed that many hedge funds have failed to match equity markets.

In the first three months of the year, hedge funds returned 3.81 percent according to Hedge Fund Research, compared with a 7.3 percent gain from the S&P 500.

Stone said he expected less volatility in the indicator over the coming months as investors waited to see if the performance of hedge funds improves.

"There will be somewhat dampened volatility until we see what happens with both the markets themselves and how the hedge funds perform relative to the market."

Demand for redemptions is still a long way off the all-time high of 19.27 percent hit in November 2008 after the collapse of U.S. investment bank Lehman Brothers. Levels have not topped 10 percent since September 2009.

Around 10 percent of the global hedge fund industry is covered by SS&C GlobeOp's data.