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Hedge Fund Investors Withdraw 104 Billion USD In The First Quarter

Hedge Fund investors have taken out an exorbitant sum of nearly 104 billion USD in 1st Quarter. This is the aftermath of continued apprehension regarding the sector’s performance. The Bernard Madoff’s Ponzi scandal has already caused a big dent in the morale of investors and this has unofficially been the reason for 85 billion USD of withdrawals.

Fund of funds was created in an endeavor to spread the investment risk for investors has been receiving a lot of brickbats for missing out on Due Diligence in regards to Madoff’s funds. Bernard Madoff’s career slate has been smeared with slime and the corporate financier has been arraigned for a 50 billion USD bid to defraud investors. His sentence is due to come out this June.

Withdrawals continue despite fund of funds that had lost some 21.3 percent last year, made a smart comeback of 0.47% in 1st Quarter. HFR’s composite index has also shot up by some 0.53% in the same quarter. The index has long been the yardstick for measuring hedge fund stability. Only last year, Hedge funds had bore a loss of some 23.5 percent of original value. It was a rare occasion with only a single precedent in the history of hedge funds.

First quarter withdrawals were also the second largest ever recorded. The only time such massive redemption was beaten was in the final quarter of last year. That time, redemption had bordered on 152 billion USD. According to HFR sources, Hedge funds have cornered some 1.33 trillion dollars of assets. Their pinnacle in the past has been roughly 2 trillion USD. Nearly 2/5th of the amount is collected in the fund of funds.

Hedge fund investments will spiral down to nearly 1 trillion USD by June predicted by Bank of New York Mellon and Casey Quirk research firm. Though the very same research firm has predicted that assets would shoot and jump back to something like 2.6 trillion USD in the coming four years or so, fund of funds will siphon 3/5th of such growth.

Hedge fund has been a conventionally guarded industry and offers very little transparency. Presently, the industry is forced to make its dealings a lot more transparent. EU is to publish a draft set of hedge fund guidelines sometime in this month.