Raising New Hedge Fund Capital During the Crisis

Raising New Capital

Raising New Capital During the Crisis

(http://HedgeFundBlogger.com) While many firms are hurting performance-wise I have spoken with over a dozen in the past 3 weeks still pushing capital raising efforts forward and showing positive performance so far for the year.

Many managers are referring to this as a Darwinian process of weeding out those funds which did not have strong risk controls in place. To be fair I think most funds had consistently applied risk controls in place to weather "regular" market volatility and fluctuations and not movements which associate the time with the great depression.

The hedge fund industry is not going away. When Soros mentions that the industry could shrink by 50% he fails to add in that most of that same capital will jump right back into other hedge funds or alternative investments within 3-5 months. There are many funds which will come out of this very strong. For some hedge fund managers this could be a great opportunity to move from the $300M-$500M range to the $1-2B under management realm where they may be considered for more institutional allocations. Here is a short article excerpt on a few hedge funds which are still raising capital.

Like most of their hedge fund brethren, Steven Cohen, David Einhorn and Paul Singer are facing redemptions. Unlike other hedge funds, however, they are able to replace it.

Faced with investors withdrawing big chunks of change, the high-profile hedge fund trio have reopened funds long closed to new investors and have raised billions of new dollars to replace the unhappy investors heading for the doors. Singer’s Elliott Management Corp. has raised $3 billion in the third quarter, and plans to raise another $1 billion, Bloomberg News reports.

Of course, it’s easier to raise new money when you are making money, as is Elliott, which has returned about 6% this year. Likewise, Brevan Howard Asset Management’s Brevan Howard Macro Fund, which is up 17% this year, has more inflows than outflows, according to Bloomberg. Read More...

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Richard Wilson said...

What do you think? Will the hedge fund industry permanently shrink to a much smaller size?

Anonymous said...

I believe the HF industry will shrink in terms of the number of funds managing money, but the assets under management will increase. This trend will be exacerbated with the (at least temporary) demise of the Wall Street investment banking model, as some of the monies that would have gone to a MS or GS investment banking deal will now find a home with a HF. The interesting by-product of that trend will be a shift in HF strategy to move even closer to the private equity model.

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