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.

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Norwalk Advocate – Some hedge funds are reducing their management and incentive fees to keep investors for longer periods during turbulent times on Wall Street.

Typically, hedge fund managers require investors to lock their money into a hedge fund for a year while charging a 2 percent management fee and keeping 20 percent of hedge-fund profits as an incentive fee – if it reaches a pre-determined point.

Camels Capital LLC, a Greenwich-based hedge fund, and Ore Hill, a New York-based fund, among others, have restructured these terms to keep investors.

"Ourselves, Ore Hill and a few other funds have taken a step to do that in this period of liquidity to lock in investors," said Richard Brendan, chief executive officer for Camels Capital. "We’ve been able to lock in our investors for a period of time to participate in opportunities with them."

Brennan would not comment on the specifics of the agreement between the hedge fund and his investors.

Scott Baker, a principal with Greenwich-based hedge fund investment firm Cookpine Capital, said many hedge funds are coming up with innovative ways to secure investor capital for longer periods.

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