Hedge Fund Redemptions Slow, Except For Funds Of Funds

Apr 23 2009 | 7:43am ET

Redemptions from hedge funds slowed in the first quarter, but those from funds of funds soared, according to Hedge Fund Research.

Investors pulled almost $103 billion from hedge funds in the first three months of the year, shrinking the industry by another 7.3%. But withdrawals are down by almost one-third from the fourth quarter of last year, when investors redeemed a record $152 billion. Equity hedge funds were hardest hit, with $35 billion in redemptions, while two strategies that actually enjoyed strong returns last quarter and last year, respectively, also losing assets. Relative value funds filled $27 billion in redemptions, while macro strategies lost $16 billion.

But the slowing redemptions industry-wide are cold comfort to funds of funds, which saw withdrawals soar 70% from the fourth quarter’s total of $50 billion to $85 billion over the last three months, the overwhelming majority of all hedge fund redemptions on the quarter.

Performance gains in the first quarter helped partially offset the declines: the HFRI Fund Weighted Composite Index returned 0.53%, earning hedge funds some $28 billion in performance gains. Still, the industry is 30% smaller than it was at its peak in June of last year, and now manages $1.33 trillion, according to HFR.

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