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Tuesday 17 February 2009
Hedge funds face new redemptions
Hedge funds are facing a second round of redemptions after several big investors hit by Bernard Madoff’s alleged $50bn fraud began liquidating portfolios, according to some of the world’s biggest hedge fund managers.
Hedge funds are facing a second round of redemptions after several big investors hit by Bernard Madoff’s alleged $50bn fraud began liquidating portfolios, according to some of the world’s biggest hedge fund managers.
The scale of the redemptions is not as bad as the heavy withdrawals that hammered the industry in October and November, but is significant enough to create problems for managers still struggling with the hangover of last year’s withdrawal requests, they said.
The head of one large US hedge fund said: “For those hedge fund managers who were wiping their brow and saying they’re through the redemptions, Madoff is a new blow.
“It is another wave, for a different reason.”
Hedge funds were hit by redemptions estimated by Morgan Stanley at 20 per cent - close to $400bn - in the second half of 2008, with another 10-20 per cent to come by the summer. This forced managers to dump shares, bonds and derivatives to raise cash and contributed to the wild swings in some assets popular with hedge funds over the past few months.
Many fund managers are facing redemptions and are trying to figure out how to stay afloat. Start up managers, however, are wondering how to start a hedge fund and how to register as an investment adviser if the hedge fund transparency act is passed.
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Hedge funds face new redemptions
By James Mackintosh
15 February 2009
Hedge funds are facing a second round of redemptions after several big investors hit by Bernard Madoff’s alleged $50bn fraud began liquidating portfolios, according to some of the world’s biggest hedge fund managers.
The scale of the redemptions is not as bad as the heavy withdrawals that hammered the industry in October and November, but is significant enough to create problems for managers still struggling with the hangover of last year’s withdrawal requests, they said.
The head of one large US hedge fund said: “For those hedge fund managers who were wiping their brow and saying they’re through the redemptions, Madoff is a new blow.
“It is another wave, for a different reason.”
Hedge funds were hit by redemptions estimated by Morgan Stanley at 20 per cent - close to $400bn - in the second half of 2008, with another 10-20 per cent to come by the summer. This forced managers to dump shares, bonds and derivatives to raise cash and contributed to the wild swings in some assets popular with hedge funds over the past few months.
Many fund managers are facing redemptions and are trying to figure out how to stay afloat. Start up managers, however, are wondering how to start a hedge fund and how to register as an investment adviser if the hedge fund transparency act is passed.
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