Few Withdrawal Symptoms So Far

Date: Monday, August 27, 2007
Author: Hedge Fund Daily

History doesn’t seem to be repeating itself as far as hedge fund redemptions are concerned, at least so far. True, it’s not even two weeks since redemption day Aug. 15, but there has been nary a report of any mass exodus by investors, a situation that could hobble the mightiest of hedge funds. According to Financial Times, “there has been nothing like the level of outflows that accompanies market wobbles in 1998, 2005 and 2006.” The reasons may lie in the changing dynamics of the industry, says FT, as investors are cushioning losses by allocating to a wide variety of hedge fund managers and strategies. Also, with more institutional investors, which do tend to be in it for the longer haul, there is less immediate reaction to adversity. Those likely to suffer the most, reports FT, citing anecdotal evidence from consultants, are managed futures, equity long/short and fixed-income arbitrage. FT also notes, “The slow-burning nature of the subprime fallout has also given managers time to mop investors’ brows – while steering expectations downward.” As time goes on, the situation may change and reports of major-league withdrawals may start flowing in, but for now, concludes FT, “the lack of a mass exodus has at least brought managers some time to recover.”