Reuters – Clients of Spain’s BBVA Patrimonios have cut hedge fund exposure by more than two-thirds over the past year after disappointing returns, says its chief investment officer, who believes the industry is in meltdown.

"Appetite for hedge funds has diminished dramatically," Enrique Marazuela told the Reuters Wealth Management Summit, adding that hedge funds had not met his clients’ return and risk expectations.

"The idea customers had about hedge funds was that they were going to have absolute returns and hedge funds controlled the risks."

However, hedge fund returns have disappointed many investors this year in high market volatility.

Hedge Fund Research’s HFRI index fell 4.68 percent in September, its second worst month after August 1998′s 8.7 percent drop, taking the year-to-date loss to 9.41 percent.

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