In 3 months, investors pull out $152 Billion from hedge funds

By siliconindia   |   Friday, 23 January 2009, 02:42 IST   |    1 Comments
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In 3 months, investors pull out $152 Billion from hedge funds
Boston: Panicked by the shrinking returns from the hedge funds, investors have pulled out investments amounting to $155 billion, with $152 billion being pulled out in the last three months."2008 hedge fund losses were widespread, with 70 percent of the funds that report to us ending the year in the red," said Sol Waksman, Founder and President of BarclayHedge, an industry research group. After the pullout, the current amount of global hedge funds is estimated at $1.4 trillion. As per the findings of the Hedge Fund Research, this is the second time since 1990 that the hedge fund industry suffered net outflows for the entire year. Confirming the industry trends, consulting firm Hennessee Group, which also tracks performance and asset flows found that last year was the worst for the industry in terms of performance and redemption since 1987. As per their data, despite many managers' promises to make money in all markets, the average hedge fund lost 19 percent last year. Faced with a worsening financial crisis, the collapse of investment bank Lehman Brothers and gyrating stock markets, and steeper hedge fund losses, wealthy individuals and many endowments and some pension funds raced for the exits pulling out $152 billion in the last three months. "Investors simply wanted their money back last year, paying little attention to the size of the hedge fund they invested in, its particular strategy, or how the hedge fund was performing," said HFR President Kenneth Heinz. So, to avoid such panicked withdrawal, hedge fund firms including industry powerhouses Tudor Investment and Citadel Investment Group suspended redemptions barring their investors from getting their money back. Hedge funds, unlike most mutual funds, lock up assets for months and sometimes years, often requiring their investors to give 45 days' notice before getting their money back.