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Alternative Market Briefing

Hedge funds regain their ability to restrict redemptions - study

Thursday, February 27, 2014

Bailey McCann, Opalesque New York:

A new hedge fund study released today by Seward & Kissel reveals notable finding: a power shift between hedge funds and investors is underway. Hedge funds now have a significantly increased ability to restrict and prevent redemptions, affecting liquidity - 89% of new funds (as compared to 64% in 2012) restricted redemptions to a quarterly or longer-term basis - a 25% increase.

As of last year, only 11% of funds permitted monthly redemptions. Also of note, no funds in the study say they plan to go down the path of general solicitation now allowed under the JOBS Act. That reaction is consistent with Opalesque's reporting on the issue which has already noted general disinterest and aversion to the compliance risks involved in advertising.

Lock-ups are present in about 19% of funds. On the redemption side, the vast majority of funds (89%) only allow redemptions on a quarterly or longer basis. For the 11% allowing monthly redemptions, that cohort has shrunk significantly from the 36% of funds in the group in 2012.

Seeding deals are also on the rise, an estimated 15% of all fund launches represented in the survey came with seed capital. This represents a shift in the perception of seed deals which has historically been regarde......................

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