Small hedge funds head for closure say experts

| 21/09/2010

(Bloomberg): As much as 20 percent of hedge funds globally may be liquidated by the first quarter because smaller managers are starved for fees and new capital, according to Merrill Lynch & Co. Hedge fund managers overseeing less than $100 million may be the worst hit, said Justin Fredericks, New York-based head of US.capital introductions, a prime brokerage team that brings together hedge funds and potential investors. Hedge funds globally returned on average 1.65% according to Hedge Fund Research Inc., headed for the third-worst annual return since the Chicago-based company started to track data in 1990 on concern that the recovery in economic growth may falter.

About 93 percent of the $9.5 billion net inflows into the industry in the second quarter went to managers overseeing $5 billion or more, said HFR.

 “Going into the year-end, there will be significant closures and we estimate it could be as high as 20 percent,” Fredericks said in an interview Sept. 17 in Hong Kong. “A large portion of managers are still below high-water marks. Performance is flat and money hasn’t been flowing to smaller managers.”
 
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