Reuters is hosting a hedge fund and private equity forum in London, Singapore and New York. I can’t yet figure out whether it is virtual or happening in real time as it has escaped my conference net. Maybe someone can help.
Client withdrawals from Britain-based hedge fund CQS slowed sharply in the first quarter of 2009, its chief executive told Reuters.Speaking Monday [March 23] at the Reuters Hedge Funds and Private Equity Summit in London, Mark Hintze, said the pipeline of redemptions was now just about matched by inflows. “Frankly, we’ve had very few redemptions coming up for April so far.”
Observers feared heavy outflows from hedge funds would continue into 2009, continuing a trend which began after the September 2008 collapse of U.S. bank Lehman Brothers Holdings Inc., when investors sold out as they scrambled for liquidity.
Mr. Hintze said CQS’s main fund had returned money early because it had “a pile of cash sitting at the bank earning practically zero” in order to manage liquidity when redemptions peaked. “Intriguingly, that got people to renege on some of the redemptions and actually this was a very positive signal that things got back to normal,” he said.
Polar Capital reports:
Hedge fund firm Polar Capital does not foresee another wave of redemptions by clients and some have even begun to invest fresh funds, its chief executive Mark Kary told Reuters on Monday [march 23].Speaking at the Reuters Hedge Funds and Private Equity Summit in London, Mr. Kary also said he believes assets in the hedge fund industry had probably fallen below $1 trillion but were now beginning to stabilize.
“Things have definitely quieted down … we don’t see any further building of redemptions in the pipeline,” Mr. Kary said. “At the margin you’ve seen the inflows starting, but they start very quietly, very quietly. It’ll take a while for confidence to get restored.”
He suggested that the growth of the hedge fund world was not necessarily merited….offering some indication of the uphill battle new and smaller managers face.
“If it hasn’t bottomed already it’s in the process of making a bottom,” he said. “I suspect we’re below $1 trillion already. I see no reason why it needs to go much lower from here. Europe seems to have more or less subsided already, things have calmed down…. The States … have really got hit very hard by what’s going on in real estate and private equity.”
However, he said the industry had grown too large during the boom years, fueled by cheap borrowing and hedge funds becoming “a bit of a fashion item.”
“The idea that you can have 10,000 hedge funds all with a short book, all with a long book, all risk managing and all doing it supremely well is … absolute nonsense. It’s a skill set that only a very small number of people can execute properly. This went from a $400 billion business to a $3 trillion business in the space of seven years and I just don’t think there’s enough talent around to be able to do that.”
Further updates from the Reuters event can be found at the Summit Blog.