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From The Opalesque Team: Asset managers surveyed in the fourth quarter of 2008 by Cerulli Associates responded at an overwhelming rate of 84% that they expected the hedge fund industry to “contract significantly” in 2009. Such dire expectations for the industry may be even more significant as they were measured in the weeks before the revelation of the Madoff fraud.

January 1, 2009 has subsequently stopped being hoped for as a possible fresh start for the industry or the larger financial markets. After a year of record performance losses many had hoped that 4Q08 would be the peak for investor redemptions. However, in the two weeks since the Madoff fraud there has already been a visible rise in year-end redemption requests across the industry from jittery advisors. Further strains are also being felt as large investors such as UBP are not waiting for regulatory agencies to enact stricter laws on funds, but are pressuring for greater transparency under the threat of asset redemption.

The historically opaque industry has already seen a change in levels of communication between managers and investors. Bahamas-based Global Equities Management recently announced the suspension of redemptions and subscriptions to their funds. In light of these suspensions the managers sent out a communication to investors this week providing information on one fund’s main investment as well as a breakdown for performance expectations of this investment for 2009.

Manage......................

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