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Wall Street Journal Blogs – In an effort to forestall more redemptions and panic, hedge-fund managers preached “strong stomachs” and washed their hands of responsibility for losses in the latest round of investor letters.
A review of nearly a dozen investor letters sent by hedge funds around the beginning of October finds a tone that could, at best, be described as somber — and, at worst, dire. Oaktree Capital Management L.P.’s Howard Marks called the last couple of weeks “the greatest panic I’ve ever seen,” while Tontine Associates LLC’s Jeffrey Gendell said he was “embarrassed by this performance.”
All told, Chicago-based Hedge Fund Research Inc. said assets at hedge funds declined by $210 billion in the third quarter, the biggest quarterly decline ever, with investors redeeming $31 billion in the third quarter alone. That was the largest quarterly redemption in history.
At the same time, the main focus of these letters is to calm investors sufficiently enough so that they don’t start another round of redemptions later this year — or perhaps invest more money. And to accomplish that feat, many of the letters said investors’ lack of understanding of the markets and the whims of government leaders had hurt them, rather than their own misevaluation of the current environment.
Commodity Online – Steep performance losses and record investor capital redemptions reduced the size of the hedge fund industry by $210 billion in 3Q08. This represents the largest historical quarterly decline in assets, according to data released the other day by Hedge Fund Research, (HFR), a leading source of hedge fund information and performance data.
Analysis compiled using HFR Database shows investors withdrew over $31 billion in third quarter, the largest net capital redemption in the industry’s history. At the end of the third quarter, total industry capital stood at $1.72 trillion, down from $1.93 trillion at the end of second quarter..
The third quarter withdrawals entirely offset the capital inflows into hedge funds during the first half of the year, bringing year-to-date net capital flows to a decline of $2.5 billion. The decline in industry assets also exceeds the entire amount of investor capital inflow from 2007, which was a record $194 billion.
National Post – With strategy-wide net outflows of more than US$31-billion in the third quarter – the largest net capital redemption in the industry’s history – things aren’t looking too good for the hedge fund industry. Its size also fell by US$210-billion, the largest historic quarterly decline in assets, according to a recent report from Hedge Fund Research Inc.
“The current financial crisis presents many similarities to the financial crisis in 1998, certainly as it pertains to the hedge fund industry,” Kenneth Heinz, president of Hedge Fund Research said in a statement. “With losses continuing through October, it appears that 2008 will be the worst year on record for both hedge fund performance and industry asset flows.”
But the outflow figure is much better than the 20% or US$400-billion in redemptions some market commentators had feared, noted Citigroup analysts Haley Tam and Daniel Garrod. And the industry’s total capital still stood at US$1.72-trillion at the end of the quarter, according to the Hedge Fund Research’s base of more than 13,000 funds.
