Hedge Funds Redemptions

Bloomberg reports that Hedge Funds Lost $100 Billion on Investor Withdrawals:

(emphasis mine)

Hedge Funds Lost $100 Billion on Investor Withdrawals
By Tomoko Yamazaki

Nov. 13 (Bloomberg) -- The global hedge fund industry lost $100 billion of assets in October, according to an estimate from Eurekahedge Pte, as firms including Sparx Group Co. and Man Group Plc were hammered by investor redemptions.

Funds fell an average 3.3 percent, based on preliminary figures from the Singapore-based data provider, as measured by the Eurekahedge Hedge Fund Index, which tracks the performance of more than 2,000 funds that invest globally. That compares with a 19 percent slide in the MSCI World Index last month.

The biggest market losses since the Great Depression and investor withdrawals hurt the $1.7 trillion hedge funds industry that manages largely unregulated pools of capital. The index of global funds has lost 11 percent this year, set for the worst performance since 2000 when Eurekahedge began tracking the data.

``This wave of redemption in the hedge fund industry is going to last for at least another six months,'' said Toyomi Kusano, president of Kusano Global Frontier, a hedge fund research firm in Tokyo. ``There are some funds that halted withdrawals, but those funds would eventually have to defreeze, and that means another wave of redemptions.''

Earlier this week, Sparx Group Co., Asia's biggest hedge- fund manager with $8.5 billion in assets, posted a first-half loss on redemptions and falling stock prices. Its assets under management on a preliminary basis were 839.1 billion yen ($8.8 billion) as of Oct. 31, compared with a peak of 2 trillion yen in August 2006.

London-based Man Group, the largest publicly traded hedge- fund manager, reported assets under management, which stood at $70.3 billion as of Sept. 30, fell to $61 billion at the beginning of November, the least since March 2007.

Shrinking Industry

``As both hedge fund managers and fund of funds scramble to meet client redemptions, one thing is clear: the industry is going to shrink substantially over the coming months, perhaps as much as 50 percent in terms of both assets under management and number of funds,'' said Kostas Iordanidis, head of hedge funds at Geneva-based Unigestion Holding SA, which invests $3.2 billion in hedge funds worldwide.

My reaction: Although a small relief rally is possible tomorrow (not guaranteed at all), longer term hedge funds have a lot of forced selling left to do, and, with a few exceptions like gold miners and coal producers, I would not touch stocks from the long side.

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