財經觀察 1657 --- Hedge funds face more pain

Hedge funds face more pain

By James Mackintosh in London
Published: January 5 2009 23:20 | Last updated: January 5 2009 23:20
Hedge funds are suffering a New Year hangover of record proportions after an end-of-year rush to suspend or restrict withdrawals of money and the first of what is expected to be a wave of closures.

Funds from London managers GLG Partners, RWC Partners and Oceanwood Capital all introduced last-minute restrictions as the year ended, while Finnish fund Ilmatar on Monday said it would close.

Hedge funds are facing a meagre year after their worst 12 months on record left most needing to make back hefty losses before they begin earning performance fees. More than 150 – including funds from some of the biggest names in the industry, such as Tudor Investment Corp, Citadel, Cerberus Capital and Highbridge Capital – have limited redemptions.

Prime brokers, which provide services to hedge funds, and managers predict continued selling pressure into the markets from suspended funds for months to come as they try to cash in hard-to-sell assets. Withdrawals are widely expected to continue to the end of the first quarter.

Ilmatar, is to close after losing 73.6 per cent in the year to the end of November, leaving it with just $9m under management. Jukka-Pekka Leppä, chief executive, said the fund was closing because of the rising costs of operating in eastern Europe and Russia, its main markets. “It is too expensive to keep the fund going,” he said.

Oceanwood, founded by a team from Tudor, and RWC’s Pilgrim fund will both withhold about 12 per cent of pay-outs from withdrawals until hard-to-sell assets can be realised, an increasingly common restriction.

GLG on Monday said it suspended withdrawals from its Event Driven fund on New Year’s eve, taking the total number of funds suspended by the company to nine. Event Driven was mainly invested in another suspended GLG fund, European Long-Short.

Just before Christmas, New Star, the stricken fund manager currently for sale, presented investors with plans to close the geared version of a fund investing in Royal Bank of Canada’s Hedge 250 index of hedge funds.

New Star – which also closed its Apollo hedge fund – said assets in the fund had plunged from $63m a year ago to less than $12m after it lost more than 70 per cent in the year to December 17, and it was no longer viable.

There was a small piece of good news for hedge funds Monday when London’s Financial Services Authority dropped its ban on short-selling, or betting against, banks and insurers, instead introducing a tighter disclosure regime.