Investors continue to flee improving hedge funds
Credit Suisse targets distressed sellers
Investors are still pulling money out of hedge funds despite investment gains helping the industry to its first quarter of growth since market falls began wreaking havoc on performance in the second half of 2008.
Assets managed by hedge funds grew by $100bn (€70.3bn) in the second quarter, according to data provider Hedge Fund Research, although investors pulled $43bn from managers in the industry.
Positive returns helped to offset the outflows to every main strategy bar distressed debt funds, where the $3.5bn of net redemptions in the second quarter was about equal to those of the first quarter.
None of the main fund investment strategies took money in last quarter, although each made money, except for short sellers.
Nearly three quarters of all hedge funds were in the black for the first half of this year, according to data provider Eurekahedge.
Overall, withdrawals were more than outweighed by the 9.1% funds made on their investments, HFR said, leaving industry assets at $1.4 trillion. This is still about one quarter smaller than at the peak of the industry's size in 2007.
Hedge funds must still make 15% on their investments to reach their previous high performance, and start charging 20% of profits as a performance fees once more, HFR added.
Morten Spenner, chief executive of investor International Asset Management, said fund managers were more nimble in trading markets this year, perhaps as memories of last year, when many registered their worst ever losses, were still fresh. Spenner said: "Managers are cognisant of not playing against the market too much, they're aware of the potential for returns, but they're more aware of the risks, too," he said. "We will not see 2009 as the best year ever, but I think it will be a steadier ride [than last year was]."
Despite this year's stabilisation in returns, some investors are still seeking to pull out, by selling their investments to competitors at a loss if need be and some groups are moving to take advantage of this.
The asset management division of Swiss bank Credit Suisse revealed that it has teamed up with US asset manager Reservoir Capital Group to launch two products aimed at buying investments directly from peers.
Credit Suisse Asset Management had about $14.2bn invested in hedge funds and funds of funds, but it is the bank's first move to develop products to deal on secondary markets, said a source with knowledge of its plans. The bank and Reservoir joins investor Permal Group in rolling out such products.
--write to dwalker@efinancialnews.com
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