HSBC Alts. Exec. Says Deleveraging, Collapses Will Slow

Apr 8 2008 | 2:00am ET

The worst is over for the hedge fund industry, according to HSBC’s alternatives chief, and after almost a year of bad news, we can look forward to less deleveraging and fewer collapses.

Bill Maldonado, head of alternatives for HSBC Halbis Capital Management, made the reassuring prediction at the Reuters Hedge Fund and Private Equity Summit in London yesterday. In fact, Maldonado said, huge cash balances could reduce market volatility and spark something of a rally. But he warned that some funds in hard-hit strategies may suspend or limit investor redemptions.

“In discussions with other fund managers, with the prime brokers, it would seem to us that the deleveraging that was going to happen for the moment has happened,” Maldonado said. And with the lower leverage industry-wide, he said fears of fund blow-ups has subsided.

“I suspect there are one or two funds that have already encountered some difficulties and will at some point soon have to declare their intentions, as it were. I don’t think they’re going to be very big funds,” Maldonado said. “I’d be surprised if more than one or two [funds] trip an alarm on a daily basis” at prime brokers.

“Broadly speaking,” Maldonado said of the prime brokers who helped trigger the massive deleveraging, “they’re not on red alert. I’m not even sure they’re on amber alert.”


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