Wealthy Not So Keen on Hedge Funds Anymore
January 16, 2009
The days when millionaire investors scrambled to get into a hot hedge fund are over, at least for now, Reuters reports. Skittish about the steep losses hedge funds experienced in 2008, investors are hesitant to put new money in hedge funds.
We have probably seen the worst of the [hedge fund industry redemptions], but I think it will be a slow go to build up that asset base again, said Don Heberle, executive director in the wealth management unit at Bank of New York Mellon.
There was a move away from high-risk assets like hedge funds to less-risky assets last year, and we are still seeing that, Heberle said. On top of that, many hedge funds have locked up peoples money longer than originally.
With average hedge fund performance of negative 19% in 2008, the industrys assets now stand at $1 trillion.
Hedge funds are viewed as being less liquid and transparent, and that, combined with the market downturn, has caused a lot of people to say, I need to be and want to be more liquid, Heberle added.