Wednesday, June 22, 2011

Hedge bosses sound alarm on super-sized funds

Hedge fund investors are turning cautious on huge, multi-billion dollar funds, say execs meeting in Monaco this week, and see better returns from the boutique funds that were once the driving force of the industry, according to Reuters.

"The feeling we have is that they (big commodity trading advisers and macro funds) all feel a bit too big compared to the real liquidity of the markets," said Patrick Fenal, deputy chairman of asset manager Unigestion in an interview on the sidelines of the conference.

So-called "two traders with a terminal" epitomised the rapid growth of the industry in the early years of the last decade, as bank prop traders setting up on their own profited from a long bear market in technology stocks and subsequent market rally. But investors deserted small funds during the crisis, and when they returned to the industry often opted for big funds, believing they were more likely to survive and could protect clients better from fraudsters such as Bernard Madoff.

Inflows coupled with strong performance helped funds such as Brevan Howard's Master fund grow to around $25 billion, while Winton Capital, which runs computer-driven funds, has around $17 billion and Moore Capital manages around $15 billion. However, investors are starting to see size as a potential danger again….

There’s more where that came from: http://www.reuters.com/article/2011/06/22/hedgefunds-size-idUSLDE75K1FD20110622?feedType=RSS&feedName=financialsSector&rpc=43

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