Funds Hub

Money managers under the microscope

The hedge fund barbell

December 23, 2009

The fledgling market for hedge fund secondaries may be becoming barbell-shaped, according to Hedgebay.

RTR21D74The firm, which provides a market for those wishing to buy and sell illiquid hedge fund stakes, said there is growing evidence that trades are happening either at very high or at very low prices.

In November, for instance, the highest trade took place at 97 pct or net asset value, while the lowest was at 29 pct.

It seems that some investors are willing to pay close to NAV for higher-quality funds that are difficult to get hold of.

Others will buy into highly illiquid funds and will be prepared to wait several years in the hope of a bumper return, as long the deal is done at a bargain basement price.

The developing markets in hedge fund secondaries provide much-needed liquidity for those hedge fund investors needing cash and fed up with a fund’s long redemption terms.

But it’s still an opaque world, where permission from the hedge fund manager is needed before a trade can take place. Investors will surely welcome the further development in these markets.

(See also Investors won’t forget)

(Picture Yves Herman)

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