Hedge fund industry finding even keel, Credit Suisse/Tremont report suggests

An analysis of the hedge fund industry’s first-quarter activity indicates that the $1.3 trillion industry is stabilizing, according to Credit Suisse/Tremont Hedge Fund Index LLC in New York. While total industry assets under management declined by $163 billion during the quarter, the index posted a three-month gain of 0.9%. This compares to a 13% decline by the MSCI World Index and a 3% decline by the Barclays Global Aggregate Bond Index in the first quarter. The Standard & Poor’s 500 stock index fell by 11.7% in the first quarter. Liquidity, transparency and fees have emerged as investors’ top concerns, according to the report. Through the end of March, 17% of all hedge funds were classified as being impaired, meaning restrictions had been placed on redemptions. The increased demand for liquidity could result in a bifurcation of liquidity terms across different strategies, according to the report. The report also stated that some strategies, such as global macro and long/short equity are likely to offer regular liquidity, while fixed income arbitrage and event driven strategies are not expected to provide as much liquidity. In 2008, 19% of all U.S. hedge funds were liquidated. This compares to an 8% annual average liquidation rate for hedge funds between 1994 and 2007.