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Hedge Fund Redemptions for November: $46 Billion

Given how dreadful September and October were for the vast majority of hedge funds, it isn’t surprising that shell-shocked investors continue to pull money out. And the withdrawals may not be entirely performance related either. Investors are shedding risk, and are likely to have lost money in other strategies, and may need to tap into hedge fund holdings to restore their personal liquidity.

Consider some other issues. November was less awful, but still not a great month either, and experts expect to see more investor withdrawals. And many funds have restricted withdrawals, so as not to be forced to dump positions quickly to meet normal redemption timetables, Those funds do plan to sell at a more measured pace and pay their clients back. But that in turn means that there is an overhang of pending asset sales that may dampen upward movements in risky asset classes.

From Bloomberg:

The global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.

“It’s very clear that there is going to be significant consolidation in the hedge-fund industry,” said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies. “Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”

Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion…

The slump takes declines to 13 percent this year …Hedge funds fell 0.4 percent on average in November, as measured by the Eurekahedge Hedge Fund Index, which tracks the performance of more than 2,000 funds that invest globally. The final figure for the month may be a 2 percent decline, said Eurekahedge, which typically receives data from poorer performing funds later.

Hedge-fund industry assets peaked at $1.9 trillion in June, data compiled by Chicago-based Hedge Fund Research Inc. show. Investment losses and withdrawals may shrink that amount by 45 percent by the end of this month, according to estimates by analysts at Morgan Stanley.

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3 comments

  1. eh

    If instead at the end of November they’d put that money into a plain old index fund — e.g. one tracking almost any primary national index, like the DAX — there would be a very nice profit to show for it now. Smart money indeed.

  2. gloomboom.com

    These funds are toast. They would be drained by now if they didn’t restrict redemptions. Only time will tell what happens next!

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