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Thursday, 1 January 2009
Hedge Fund Manager Slams Peers for Curbing Clients’ Access to Cash
John Paulson, who runs the US$36 billion hedge fund firm Paulson, has some harsh words for his peers and their tendency this year to block or curb clients’ attempts to get their money back.
Hedge Fund Manager Slams Peers for Curbing Clients’ Access to Cash
Bloomberg in New York 1 January 2009
John Paulson, who runs the US$36 billion hedge fund firm Paulson, has some harsh words for his peers and their tendency this year to block or curb clients’ attempts to get their money back.
“We think it’s a mistake for managers to use gates and other tools to limit investor access to their funds,” Mr. Paulson said.
“While we recognise the difficulties of the current environment, we think it is a manager’s responsibility to raise liquidity to meet the redemption needs of their investors.”
Mr. Paulson can make his case for client-friendly policies because he made money for investors this year.
His largest fund, the US$13 billion Paulson Advantage Plus has climbed about 38 per cent to December 19, making it the best performer among multibillion-dollar funds.
Most hedge fund managers have had a tougher year than Mr. Paulson.
On average, these private partnerships tumbled 18 per cent to November, according to data compiled by Hedge Fund Research.
Industry assets could shrink as much as US$800 billion from their June peak, starting this year with about US$1.1 trillion, according to estimates by Morgan Stanley. That has caused some managers to try to hold on to client capital.
As of October, 18 per cent of hedge fund assets - managed by 5 per cent of hedge funds - were subject to some restriction on withdrawals, according to Peter Douglas, the principal of hedge fund consulting firm GFIA.
Mr. Paulson criticised his fellow managers, saying there had been plenty of opportunities to raise cash.
“Even in opaque areas of the markets such as in bank debt, mortgage-backed securities and other distressed securities, we see hundreds of millions of dollars trading every day,” he said.
Mr. Paulson was “especially surprised” by managers who restricted withdrawals in cases when the requests accounted for 25 per cent or less of assets under management, and where “the managers have the cash and one of the stated reasons for restricting withdrawals is so the manager can continue to invest in new opportunities”, he said.
Armel Leslie, a spokesman for Paulson, declined to comment.
Managers who have suspended or restricted redemptions include Ken Griffin’s Citadel Investment Group.
The firm’s two main funds manage about US$10 billion in assets and got US$1.2 billion in redemption requests.
DE Shaw, the investment company managed by David Shaw, limited withdrawals after it received redemption requests of more than 8 per cent of assets.
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Hedge Fund Manager Slams Peers for Curbing Clients’ Access to Cash
Bloomberg in New York
1 January 2009
John Paulson, who runs the US$36 billion hedge fund firm Paulson, has some harsh words for his peers and their tendency this year to block or curb clients’ attempts to get their money back.
“We think it’s a mistake for managers to use gates and other tools to limit investor access to their funds,” Mr. Paulson said.
“While we recognise the difficulties of the current environment, we think it is a manager’s responsibility to raise liquidity to meet the redemption needs of their investors.”
Mr. Paulson can make his case for client-friendly policies because he made money for investors this year.
His largest fund, the US$13 billion Paulson Advantage Plus has climbed about 38 per cent to December 19, making it the best performer among multibillion-dollar funds.
Most hedge fund managers have had a tougher year than Mr. Paulson.
On average, these private partnerships tumbled 18 per cent to November, according to data compiled by Hedge Fund Research.
Industry assets could shrink as much as US$800 billion from their June peak, starting this year with about US$1.1 trillion, according to estimates by Morgan Stanley. That has caused some managers to try to hold on to client capital.
As of October, 18 per cent of hedge fund assets - managed by 5 per cent of hedge funds - were subject to some restriction on withdrawals, according to Peter Douglas, the principal of hedge fund consulting firm GFIA.
Mr. Paulson criticised his fellow managers, saying there had been plenty of opportunities to raise cash.
“Even in opaque areas of the markets such as in bank debt, mortgage-backed securities and other distressed securities, we see hundreds of millions of dollars trading every day,” he said.
Mr. Paulson was “especially surprised” by managers who restricted withdrawals in cases when the requests accounted for 25 per cent or less of assets under management, and where “the managers have the cash and one of the stated reasons for restricting withdrawals is so the manager can continue to invest in new opportunities”, he said.
Armel Leslie, a spokesman for Paulson, declined to comment.
Managers who have suspended or restricted redemptions include Ken Griffin’s Citadel Investment Group.
The firm’s two main funds manage about US$10 billion in assets and got US$1.2 billion in redemption requests.
DE Shaw, the investment company managed by David Shaw, limited withdrawals after it received redemption requests of more than 8 per cent of assets.
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