Monday, 23rd November 2009

 

4 June 2009 - David Walker

Investors stay cautious on hedge funds

The number of investors withdrawing their investments with hedge funds has slowed to about one-fifth of the record redemption levels at the end of 2008, according to new research, but they are still holding off putting new money into an industry recovering from its worst year to date.

Morgan Stanley has published a report called 'Wholesale Financials' has found that so far during the second quarter, investors might have redeemed 5% of all money invested in the $1.3 trillion (€920bn) hedge fund industry.

If the US bank’s estimate is correct, this would represent just one fifth of the record 25% investors pulled in the fourth quarter of last year. It would also continue a trend of withdrawals tapering off, after investors pulled 10% of their money in the first quarter of this year, according to the report.

Huw van Steenis, head of European banks and financials research at Morgan Stanley, attributed the slowing of withdrawals to the fact hedge funds made about 2.8% in April, whereas equities fell by 15%.

He said: "We see a material slowing in hedge fund outflows in the second quarter, and while the redemption cycle is not over, we have revised up our expectations for hedge fund assets to be $1.2 trillion to $1.3 trillion at the end of the year.”

Van Steenis added that a "dramatic" deceleration of redemptions had occurred at the hedge fund unit of asset manager GAM. Peer Och Ziff Capital Management took money in during May, he added, and Man Group was also taking money in, on balance, from private clients.

However, while investors in hedge funds may be curbing their withdrawals, they are not yet ready to put more money into hedge funds, according to the fund ratings unit of Standard & Poor's.

Randal Goldsmith, S&P's fund services lead analyst, said some funds of hedge funds were holding more than 20% of their assets as cash at the end of the first quarter, and their use of leverage to invest more in hedge funds "is as low as we have ever seen it”.

One London fund of funds manager said: "A lot of us are holding fire on investing again, even though we're not seeing the withdrawal requests we once did. I would expect a lot of money to be put to work later this quarter, and through the rest of this year."

--write to dwalker@efinancialnews.

Tags: Europe , Hedge Funds , Morgan Stanley

Most Read

  1. High net worth City workers mull relocating to Switzerland
  2. Miller wealth start-up eyes family office mandates
  3. BarCap acquires Morgan Stanley real-estate subsidiary
  4. Blow for UK property barons as new venture posts £101m loss
  5. Colonel Gaddafi's son buys £10m London property

Brummel

Relocation, relocation, relocation

Banks have never been shy of firing staff at the merest whiff of a downturn. First the fat, then the muscle and finally the bone. In the past, cuts have been so deep that firms have found it hard to benefit when the markets rebounded, paying over the odds to restaff at speed. Such wild oscillations in staffing numbers are known as “doing a Merrill”.

Rich Monitor

Chopard out to show it has good timing

Luxury brands that thought they were immune to the vagaries of the global economy because they marketed their wares to the wealthy, have had a rude awakening this year.

2nd Floor, Stapleton House, 29-33 Scrutton Street, London, EC2A 4HU

Tel: +44 (0) 20 7309 7788

Company No 3089347