Alternative Market Briefing

Hedge fund liquidity concerns as redemptions see slight uptick

Thursday, June 23, 2011

From Kirsten Bischoff, Opalesque New York:

Three things are causing some concern over potential liquidity problems in the hedge fund industry.

Hedge funds investors have shown the first signs of "jitters" as redemption requests for July show the first increase since the market recovery drove strong hedge fund returns in 2010.

Hedge fund managers are bearish about the second half of the year, after poor performance has almost every strategy flat in 2011.

Big hedge funds have received the lion’s share of allocations following the global financial crisis swelling the coffers of many to pre-crisis size.

As global economies experience a sharp slowdown in recovery, and the looming threat of a "double dip" recession remains, there is mounting concern that large hedge funds may not be able to meet liquidity promises, should there be a further (and simultaneous) drop off in the markets and investor confidence.

While hedge funds recovered assets relatively quickly after strong 2010 performance, fund of hedge funds took longer to recover from the liquidity crisis. And they are the first vehicles that investors are re-evaluating in terms of the possible liquidity troubles they may have if global economic troubles increase.

One fund of hedge funds manager that Opalesque recently spoke to voiced concerns over the assets that flowed into the largest hedge funds from fund of funds and other investors alike. The w......................

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