The hedge fund industry is braced for a new round of redemptions after two months of poor performance and growing investor desire to move money into cash.
The world’s largest listed hedge-fund manager, Man Group PLC , stoked fears of another industry meltdown Wednesday when it reported a net $2.6 billion was pulled from its funds between June 30 and Sept. 26. It lost a further $1.5 billion from fund losses and $1.9 billion from the effect of a stronger U.S. dollar when accounting for euro- and Australian dollar-denominated funds. Its GLG unit, acquired last year, posted particularly large outflows.
Man Group shares fell as much as 25% in London.
Aberdeen Asset Management PLC (ADN.LN), a U.K. fund manager with about GBP26.2 billion of its GBP176.9 billion in alternative investment strategies, Monday said those funds lost about GBP2.2 billion between June and August from redemptions and performance losses.
Despite volatile markets this year, redemptions have been relatively subdued for most hedge funds, but high-profile losses over the summer and the deepening euro-zone debt crisis and economic gloom could send investors toward the exits. Most large managers of long-only equity and bond funds posted outflows last week, data provider EPFR Global said Monday, highlighting how investors are taking risk off the table.
Friday marks a deadline for investors in many hedge funds with monthly and quarterly liquidity to say they want their capital back.
Expectations of further hedge-fund losses for September come after an average 2.3% decline in August, according to Hedge Fund Research Inc.’s HFRI Fund Weighted Composite Index, the largest monthly decline since May 2010. An HFR index tracking a smaller pool of funds offering daily liquidity, the HFRX Global Hedge Fund Index, was down 2.51% in September as of Monday, while a report from HSBC Private Bank shows that most funds reporting intra-month performance were down on the month as of Sept. 23.
Still, some funds are doing well in the tough environment. Brevan Howard’s BH Macro Ltd. (BHMG.LN), a listed feeder into its Master Fund, in a regulatory filing said it was up 1.61% for the month as of Friday. It gained 6.2% in August.
Winton Capital’s Futures Fund, following a similar systematic strategy, was up 1.04% as of Sept. 21, and 7.25% so far this year, according to the HSBC report.
Managers stressed that many investors still see the diversification benefits and potential of outpeformance from hedge funds, and will likely stay put as long as there is nowhere else particularly attractive to move capital.
The global hedge-fund industry managed around $2.04 trillion at the end of June, according to HFR, after dipping as low as $1.33 trillion in the first quarter of 2009.
Source: MarketWatch