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From the Opalesque Team: Funds of hedge funds (FoHFs) suffered a hard hit in the first quarter of 2009, with Hedge Fund Research (HFR) reporting an $85bln loss due to investor redemptions.
The number represents approximately 80% of the $104bln in redemptions that left the hedge fund industry in the first quarter of the year.
The combination of performance losses and redemptions suffered by FoHFs in the last quarter of 2008 and the first quarter of 2009 have taken their toll. In mid-April Hedgefund.net reported a historic shift within their database as FoHFs’ closures would account for almost 49% of the “database dropoff” in April, notable as FoHFs only account overall for 35% of the database products.
“Clients worldwide are reassessing fund of funds,” said BlackRock Chairman and CEO Laurence Fink during the firm’s first quarter earnings call.
Most worrisome for FoHFs is the leap in redemptions from $50bln in 4Q08 (after FoHFs lost 21.3% in 2008) to $85bln in 1Q09, even after FoHFs reported slight gains this quarter (47bp according to HFR).
Investor confidence in the “additional ring of due diligence” FoHFs promise to provide has been shaken by poor performance and asset losses in highly publicized collapses and scandals. This problem has followed FoHFs into 2009 with the most recent admission by UBS, which reported a $2m loss to investors due to investments in collapsed firm Weavering Capital.
Although Fink expressed confid...................... To view our full article Click here
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