Hedge fund assets to fall below $1 trillion
Hedge fund assets under management could fall to less than half of their peak high by this time next year, according to new research, as the poor performance of the sector and a flood of redemption requests combine to batter the industry.
According to research by Morgan Stanley, hedge fund's assets under management are likely to sink to $900bn (€706.8m) by the end of 2009. The figure had been $1.93 trillion in the first half of 2008.
The report said: "We estimate 25-30% redemptions from European and Asian hedge funds, 15-20% from US, combined with negative performance of 15-22% in H2 of 2008, driving material shrinkage.
"We think Europe will be higher due to shorter liquidity terms, [and] a bias to high net worth individuals and fund of hedge funds with leveraged notes, but we also see the US rate increasing for those with shorter redemption periods too."
The prediction comes as global hedge fund returns have dropped to -22.1% so far this year, according to research from Hedge Fund Review. The HFRX Global Hedge Fund Index to November 24 is down -2.8% for the month to date, and follows a return of almost -10% in October.
The industry’s total assets under management dropped 9%, or $115bn, in October to $1.56 trillion, according to figures compiled by Hedge Fund Research.
Morgan Stanley's analysis represents one of the biggest figures for hedge fund redemptions predicted since performance first turned sour in the final months of last year.
US advisory boutique Empirical Research Partners predicted last week that redemptions from hedge funds and mutual funds combined would total $1 trillion by the end of the year, with around $650bn withdrawn from hedge funds.
-- write to mturner@efinancialnews.com
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