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Financial Standard – Pension funds around the world are expected to pump up their $547 billion hedge fund allocation by more than $60 billion before December as they look to balance assets and liabilities, new research shows.
Hedge fund managers are expected to heap an extra $63 billion into their coffers from pension funds and family offices.
But insurance companies, private banks, endowments and foundations are all likely to decrease their allocations to the sector, according to Barclays Capital.
The report, which surveyed 300 investors and 100 hedge fund managers representing $873 million of hedge fund assets, noted investors were ready to aggressively allocate their cash balances but will demand liquidity in the process.
New York Times – Hedge funds’ annus horribilis is getting worse. The average fund, after losing nearly 5 percent in the first eight months of the year, was down an additional 7 percent in September, according to Hedge Fund Research. Many other factors are making life difficult for fund managers, too. An industry shakeout looks inevitable.
At the end of last month, many funds were expecting more than the usual level of requests from jittery investors to pull cash out. It’s hard to plan longer-term trades if your investment funds might suddenly be snatched away. And a flood of redemptions can force the sale of assets, hurting remaining investors — one reason that fund managers sometimes block withdrawals.
On top of that, hedge funds used to bolster returns with lots of borrowed money. Now that has become a scarce commodity. The ability to bet on price declines has also suffered, thanks to partial or complete bans on selling stocks short in markets around the world.
Reuters – Hedge fund managers are facing D-day as investors demand back billions of dollars from ailing and healthy funds alike.
Funds managers around the world said they are sitting on record levels of cash to meet an expected flood of "I want my money back" notices on Sept. 30 — the end of another month of horrible industry performance and the deadline for most funds offering monthly and quarterly redemptions.
"This is not like flicking a light switch," said Timothy Mungovan, a partner who advises hedge funds at law firm Nixon Peabody LLP. "It is more like a bowling ball careening down an alley where we don’t know if it will go down the gutter or be a strike and take out several big funds."
The issue goes beyond well-paid hedge fund managers losing lucrative asset management fees: Global markets could be jolted if hedge funds are forced to dump stocks, bonds and other securities to meet redemptions.
Even industry stars such as Kenneth Griffin of Citadel Investment Group are nursing losses and the average hedge fund is down roughly 10 percent so far this year — the worst performance in more than a decade.
