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Reuters – A wave of hedge funds are being launched this year by traders as the financial crisis fuels a shakeout of talent from Wall Street banks and big investment firms, an industry executive said.
Record redemptions last year prompted hundreds of hedge funds to shut down, and swooning markets have made it difficult to raise new capital. Still, one leading financial services technology firm said a growing number of managers are braving the tough environment to strike out on their own.
"There’s a huge resurgence of new start-ups," said Jayesh Punater, chief executive of Gravitas Technology, whose company builds and manages technology systems for investment firms.
Reuters – A shakeout of the hedge funds industry could be over by June 2009, with nearly half of firms likely to shut up shop, a leading hedge fund manager said.
"The hedge fund bubble has popped and, unfortunately when any bubble pops, it’s a painful process," said Ken Kinsey-Quick, head of multi-manager of hedge fund firm Thames River Capital.
"If half were to close down, I wouldn’t be surprised. But the nice thing about hedge fund land is that things move very very quickly, it will probably be done and dusted by June," he continued
Hedge funds returns were a negative 19 percent last year, when investors pulled out a record $158.9 billion (113.86 billion pounds), according to data from Lipper.
International Herald Tribune – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again.
Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
New York Times – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again. Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors for longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
Fees will face greater scrutiny. The archetypal hedge fund charges 2 percent of assets and skims off 20 percent of investment gains, the longstanding “2-and-20” structure. But some funds have had to offer breaks on fees lately to persuade investors not to take their money out. Investors will be more selective and are likely to put downward pressure on fees. All the same, it is probably too soon to sound a Last Post bugle call for 2 and 20.
