Demand for Hedge Fund Separate Accounts ‘a Knee-Jerk Reaction’

Bloomberg – Hedge fund investors’ growing demands for separate accounts may be an overreaction to increasing redemptions and fraud, participants said at an industry conference in Hong Kong this week.

Investors are demanding accounts that allow them to tailor investments, see trades and get out when they want, instead of the traditional way of pooling their money in a fund, as managers try to curb redemptions and after U.S. financier Bernard Madoff’s conviction for running a Ponzi scheme.

A record $155 billion was pulled from hedge funds last year, according to Chicago-based Hedge Fund Research Inc., while capital outflow may accelerate to $168 billion this year, a Deutsche Bank AG survey in March showed.

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