The Straits Times
Nov 13, 2008 |
Hedge fund assets fell $151b
NEW YORK - HEDGE fund assets fell by US$100 billion (S$151 billion) in October as investors withdrew their money and funds were forced to sell stock, exacerbating the severe volatility that pounded global markets during the month.
About US$60 billion of the US$100 billion in asset losses during the month came from investor redemptions, according to a report on Wednesday released by Eurekahedge, a data and research provider.
Hedge funds' assets totalled US$2.497 trillion at the end of the third quarter, according to HedgeFund.net, a hedge fund data provider.
Hedge fund selling has widely cited as one of the reasons for the increase in volatility in equity and bond markets during October.
The Dow Jones industrial average fell 14 per cent during the month, while the Standard & Poor's 500 index declined 17 per cent.
'It's pretty clear that hedge fund redemption has had an impact', said Mr Donn Vickrey, co-founder and chief analyst at independent research firm Gradient Analytics.
Financing requirements also forced hedge funds to sell, said Mr Ted Berenblum, head of alternative investments at BNY Mellon Wealth Management.
As the credit crisis worsened, banks tightened lending requirements for nearly all customers from retail borrowers to large corporations.
That forced hedge funds to deleverage their balance sheets, which meant more selling, he said.
Mr Vickrey said reducing leverage likely forced some funds to sell positions they might have wanted to hold.
Despite the massive amount of selling in October, hedge funds overall still outperformed markets.
Eurekahedge's broad Hedge Fund Index fell 3.3 per cent in October. Its North American Hedge Fund Index declined 4 per cent.
About 56 per cent of hedge funds in Eurekahedge's database posted losses in October.
Moving forward, Mr Berenblum said redemptions and sales are still likely to continue as hedge funds look to increase liquidity and investors pull money.
But, Mr Berenblum thinks most of the deleveraging by the funds is done.
'I'd like to think we're more than half way, but there's still more to come', he said. -- AP
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