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Hedge Funds

European Fund of Hedge Funds

By Richard Wilson on 09/01/2010 – 6:10 pm PDTLeave a Comment

European Fund of Hedge Funds

European Fund of Hedge Funds Face Grim Future

Funds of hedge funds are facing a hard reality as the industry suffers large outflows. According to Reuters, many smaller European fund of hedge funds may close or have to go through a merger or sale. These fund of hedge funds have seen a fifth of the industry’s assets leave in $130 billion outflows. While hedge funds have recovered successfully after 2008, fund of hedge funds are still struggling to generate impressive returns and attract investors.

Having seen $130 billion (84.5 billion pounds), or more than a fifth of assets, leave since the start of last year, firms are still finding asset-raising tough, as witnessed by Eddington Capital’s recent decision to shut down and return clients’ cash.

And with negative returns so far this year hardly likely to encourage a flood of new investors, a sector that many say is overcrowded will have to face up to lower incomes and higher costs, through closure or deals, or by changing their focus.

“There will be attrition,” said Mark Wightman, hedge fund industry commentator and head of strategy for Asia-Pacific at specialist technology group SunGard.

“I’d expect M&A and consolidation in the sector because a lot of guys are doing similar things,” said Wightman who closely advises funds of funds on corporate issues.

Last year Cheyne Capital bought smaller fund of funds firm Altedge, while last month Swiss private bank Reyl Group’s fund of funds unit told Reuters it was looking at options such as a merger or acquisition to help it bulk up. Source