The redemption pipeline looks like it looked prior to all the troubles. Net subscriptions are also back to historical levels…Start-ups really went quiet mid-2007. A lot more clients are not start-ups…During the second half we have added several significant clients and at the same time our existing clients have performed well. We have added 22 new clients so far in the second half of 2009…Performance has been very good for our clients, who have made money every month since last December. That’s translated into improved subscriptions….In the long term, fees might fall, but we’ve not really seen that yet. New funds are more likely to cut deals though, or give up part of the management company to attract capital…I don’t think we’ll get back to 2005 [in terms of new fund starts] – but then there was an unusually high level of new funds.

Hans Hufschmid, CEO of GlobeOp Financial Services, a hedge fund administrator, serving an aggregate $106b AUM as of December 2009, up 28% from the end of 1H09, when it administered $83b. He went on to emphasize that he was seeing new funds starting up that focus on distressed debt and fixed income: “that’s where the opportunities are. These are the assets the banks have been selling.” Nonetheless, many of these are smaller launches. This is a far cry from the “the ”$1.2 trillion” that Hans and the young professors had supposedly wagered.”

We started getting patchy interest in launching new funds in the summer, which has turned into solid instructions for the end of 2009 and the start of 2010…Strategies are often targeted with a specific set of investors in mind. More managers are prepared to send out draft documents to prominent clients and potential clients to determine if a strategy works for them, and then re-define it depending on the feedback received.

–Ingrid Pierce, head of the Cayman Islands hedge fund practice at Walkers: FT

$50m is the new $500m…They are injecting their own funds while they get back into the game and establish a track record, so if significant money returns next year they can show the strategy works.

–Gray Smith, partner at Appleby, a legal firm in the Cayman Islands. Hufschmid notes that the assets these funds are focused on are illiquid, and “Hedge funds may buy and hold these for between one and three years to extract the value” : FT

Hedge Fund Research recently reported that following $330b in net redemptions in 1H09, hedge funds saw net inflows of $1.1b in 3Q09. Nonetheless, this is far short of the $60b quarterly net inflows prior to the crisis in the first and second quarters of 2007.

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