Hedge fund gains fail to stop redemptions
Hedge funds continued to suffer redemptions in the first quarter of 2009 despite improved performance, as investors remain sceptical about an industry facing widespread consolidation and structural change, according to data released Tuesday by Hedge Fund Research.
Investors withdrew some $104bn, or 7.4% of industry assets, for the three months to March 31.
The total redemption figure fell from $152bn in the previous quarter, but contributed to a record withdrawal from funds of hedge funds—$85bn, compared with $50bn in the fourth quarter of last year, said Chicago-based HFR.
Meanwhile, performance rose, with HFR's composite index posting a gain of 0.53%. Funds of funds recorded a gain of 0.47%, said HFR.
The slight gains after last year's record losses aren't enough to keep investors interested and most are waiting for the industry to stabilise before going back in, experts said.
"Investor risk aversion remains at elevated historical levels as industry consolidation continued through quarter-end," HFR President Kenneth J. Heinz.
"In addition to performance, investors are focused on structure and transparency, and the industry is in the process of evolving to meet these demands," he added.
Others have said high-net-worth investors are driving redemptions and institutions such as large pension plans remain committed to the industry.
Institutions accounted for less than 17% of net redemptions over 2008 and 2009, according to a study published Monday by Bank of New York Mellon and Casey Quirk & Associates.
"High-net-worth investors' future commitment to hedge funds will depend on capital market conditions and hedge fund returns during the next several years," the study said.
Turmoil in the industry over the last year, which saw numerous funds taken out, is continuing, with investors demanding better financial terms and governance, and large-asset managers making a play for smaller funds.
Last week, asset manager BlackRock, which has some $1 trillion under management, agreed to buy hedge fund manager R3 Capital Management, which runs $1.5bn in credit strategies.
—Write to Marietta Cauchi at marietta.cauchi@dowjones.com
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