Reuters – Union Bancaire Privee has cut its exposure to hedge funds and industry performance has disappointed, while other assets look more attractively-priced, a top executive said.

Christophe Bernard, the Swiss-based firm’s head of asset management, also told the Reuters Wealth Management Summit that the industry, estimated at $2.6 trillion, could shrink by one-third over the coming quarters as investors withdraw assets.

"The extent of what’s happening this year is unseen in the industry," he said, adding the industry’s problems are more drawn out than during 1998′s demise of Long Term Capital Management and Russian crisis or losses it sustained in 2001 and 2002.

"Hedge funds are meant to produce absolute returns. If we say nothing happens (by the end of the year) it will be down 10-11 percent. The basic function of hedge funds will have failed."

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