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Industry Updates

IAM: Hedge fund industry shows signs of stabilisation with continued reduction in redemption rates and positive performance

Monday, June 29, 2009
Opalesque Industry Updates - Hedge fund industry has been fundamentally redefined and presents a distinct opportunity set within trading orientated and liquid strategies

Morten Spenner, CEO of International Asset Management (IAM) comments on recent trends and developments in the hedge fund industry:

- Various hedge fund indices are broadly positive year to date with the exception of CTAs, and overall, outperforming global equity indices

- Selling pressure from FoHFs is abating due to: FoHF closure; better access to credit lines; improving cash flow from underlying investment redemptions and less pressure to sell most liquid assets, i.e. fewer forced sales

- The closure of bank proprietary trading desks, hedge funds and other market participants has meant fewer risk takers present

- Counter-party risk (i.e. custodians, trading counterparty) is under high scrutiny with increased diversification of this risk (i.e. multiple prime brokers, cash balances invested on conservative and diversified basis)

- The regulatory and fiduciary environment poses an increased risk (i.e. short bans, material dilutive actions by governments to support companies, punitive tax regimes etc)

- Strategies that benefit from a simple approach will have the greatest opportunities going forward; equity long/short, trading, event driven, credit arbitrage

- Illiquid (difficult to trade and/or price) and complex strategies are out of favour

- Relative Value strategies for small funds ( - Smaller long/short equity funds will not be impacted, as they are less reliant on financing

- There is less appetite for path-dependant strategies

- Use of risk aggregation and other risk controls to account for tail risk is increasing

- Providers of credit (i.e. prime brokers, custodians, investment banks) are unwilling or unable to provide credit lines under the same conditions and to the same extent as previously was the case: credit has become a scarce commodity provided under strict conditions (i.e. collateral, leverage, cost)

- The quality of risk/reward is under more scrutiny


International Asset Management (IAM) is one of the oldest specialist independent fund of hedge fund investment managers in Europe. IAM was founded in 1989 and has offices in London, New York and Stockholm. Assets under Management are approximately US$2.6bn as at end Dec 2008.

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