Money managers under the microscope
A timely withdrawal?
Spanish bank BBVA’s move to close down its alternative investment arms including hedge funds shows just how much things have changed in the industry, even within the past year.
And judging by forecasts, the possible effects could be fairly bad for many hedge fund firms.
Research from Morgan Stanley shows 2009 may not be any better than 2008 for the once-booming industry, and could actually be worse.
The bank expects industry redemptions of between 15 percent and 30 percent this year, after 20 percent withdrawals in the second half of last year, taking the industry below $1 trillion in size.
It now seems an age since money was gushing into hedge funds and assets were rising above $2 trillion on some measures.
Even last year the industry saw net inflows during the first half, according to Hedge Fund Research.
Man Group’s Swiss-based fund of hedge fund unit RMF, which was caught out by the Bernard Madoff scandal, looks like another one to suffer, according to Morgan Stanley.
It now believes RMF will see RMF’s assets will fall by around 75 percent from peak to trough, adding Madoff is “a key aspect”.
Some in the hedge fund world have optimistically predicted a levelling off in hedge fund assets and maybe a pick-up as performance improves.
But it looks as if a lot more funds in London and the U.S. will have to close before the industry’s downturn is over.