Hedge Funds Drop $782B In 2008

Jan 21 2009 | 2:57am ET

Hedge fund assets fell by $782 billion in 2008 to $1.21 trillion, a 39% decline since the beginning of 2008 and leaving industry assets at their lowest level since 2006.

The hedge fund industry experienced net redemption outflows of $399 billion, according to the Hennessee Group, the largest outflow in industry history and a dramatic reversal last year’s $278 billion inflow. Another $382 billion disappeared due to negative performance; the Hennessee Hedge Fund Index declined 19.2% last year.

“2008 was the worst year for hedge funds in both redemptions and performance since Hennessee Group Research began recording performance and assets in 1987,” said Charles Gradante, co-founder.  “In addition, a number of high profile funds liquidated or froze redemptions which was a tactic historically employed by hedge funds with smaller capital bases. Compounding the matter further, the industry was hit with its largest Ponzi scheme in history.”
 
Total assets invested in arbitrage and event-driven funds were down approximately 43% last year, when the Hennessee Arbitrage/Event Driven Index fell 18.6%. Arbitrage strategies were greatly affected by the massive deleveraging and volatility in the credit markets, and redemptions would have likely been greater had it not been for many funds instituting gates, according to Hennessee.
 
Long/short equity fund assets fell approximately 36% in 2008, while the Hennessee Long/Short Equity Index declined 18.3%.  Investors in need of liquidity sought capital from their long/short equity investments as their allocations to multi-arbitrage and other potentially illiquid strategies were tied up due to the institution of gates or creation of side pockets. 
 
Global macro funds lost 40% of their assets, with the Hennessee Global/Macro Index falling 20.2% for the year. Global macro funds with exposures to the international markets, particularly the emerging markets, suffered extreme sell-offs and endured the most redemptions within this category in 2008.


In Depth

Q&A: Filippo Pignatti Morano On The Ultimate Alternative Investment...Classic Cars

Jan 29 2015 | 12:37pm ET

In 2011, Filippo Pignatti Morano launched a fund to invest in classic cars. FINalternatives...

Lifestyle

Looking For A Hedge Fund Manager? Try Davos

Jan 28 2015 | 8:48am ET

Davos, Switzerland seems to have become the hedge fund capital of the world—at...

Guest Contributor

Five Tips For Successfully Marketing Your Hedge Fund

Jan 30 2015 | 9:14am ET

When it comes to the hedge fund industry, the notion of “build it and it will...

 

Editor's Note