WEST PALM BEACH, FL (HEDGECO.NET) – An increasing number of hedge funds are seeking alpha in private equity, according to a new report from Reuters. The recent asset growth in the industry has led tocapacity constraint problems, with too many funds chasing diminishing trading opportunities. Many funds are now looking for new markets in Private Equity.
The convertible arbitrage strategy saw a net outflow of assets during the 3rd quarter, while other hedge fund strategies made significant asset gains during the same period.
Steven Costabile, head of private equity funds at AIG Global Investment Corp told an audience at the Blue Ribbon Hedge Fund Symposium that “The low-hanging fruit has gone. Hedge funds are looking elsewhere, for broader mandates and longer lock-ups.�
Some market analysts believe that opportunities in private equity are also diminishing, and may also suffer similar fate as convertible arbitrage. This year the convertible arbitrage strategy has become one of the worst performing strategies. Analysts trace such poor performance to the drying up of implied volatility on the long term convertible issues. Many hedge fund managers using convertible arbitrage have suffered losses in 2004, as a consequence of its poor performance.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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