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From Kirsten Bischoff, Opalesque New York: A Merrill Lynch and Capgemini survey reported one effect of the current market environment is investors redeeming funds from floundering strategies in a flight to cash (Source). Additionally, according to another study by Greenwich Associates and Global Custodian, “hedge fund managers around the world responded to last year's difficult market conditions by lowering leverage ratios and moving a significant share of their assets into cash.” (Source)

In addition to deleveraging during market turmoil, the trend to increase cash assets can also be seen as single strategy managers gather cash assets in order to pounce on anticipated opportunities (perhaps the perceived imminent opportunities in distressed debt, or the eventual rebound of financials). Indeed fund of funds have also begun to grow their cash assets whether they are newly formed joint venture seeder funds with the resources to wait for the next “phenom” manager, or a team requiring a cash buffer so new opportunities don’t hinge on redemptions from other investments. Whatever the reason, it see......................

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