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Sol Waksman From Kirsten Bischoff, Opalesque New York:
Pushing the "absolute return" story in the months and years leading up to 2007 and the financial crisis had a devastating effect as hedge funds saw big losses through 2008. Irate investors left hedge fund vehicles en masse, some driven by their own liquidity needs, others sorely disappointed at what they thought was to be guaranteed positive performance.
However, a strong rebound in performance, frank discussions about alpha and beta performance drivers, and a shift in the story to stress the capital protection that most managers offered when the markets were tumbling, has seen assets flow back into hedge funds through 2011. But with the recent market fallout of late summer, it remains to be seen whether or not that investor confidence will last.
"Investors were very kind to hedge funds in the first half of the year. The industry raked in $73bn which goes down as the heaviest first half inflow since 2007," commented BarclayHedge President Sol Waksman in a statement released by the firm on Monday. "But we wonder if strong inflows will persist through the remainder of the year in light of the recent bloodbath in equities."
Of course, that likely comes down to how hedge funds maneuver the market stress, and how long that stress lasts. However, the extreme volatility that has been seen in the beginning of August can threaten hedge funds when risk levels or met and managers are required ...................... To view our full article Click here
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