European hedgers bleed assets

The hedge-fund-of-funds sector in Europe may lose three-quarters of its assets, compared with the beginning of 2008, according to an analysis published today by London-based news service Reuters Group Ltd. The fund-of-hedge-funds industry was hit hard by currency hedges as well as losses from the Bernie Madoff scandal, the report said. Experts predict that those losses, combined with redemptions of about 50%, could result in the industry’s losing 75% of its assets, compared with a year earlier. Moreover, the dollar’s increase in value against the euro could cause further losses as margin calls on currency hedges are draining cash, the report said. Funds of hedge funds represent about 40% of the hedge fund industry, Reuters reported. Its benchmark, the Hedge Fund Research’s HFRI Fund of Funds Index, lost 19.97% last year.