Hedge fund investors pulled a record $40bn out of the industry in October as poor performance prompted a flight to cash, according to data issued Thursday. Hedge funds were hit by more redemptions in October than at any time since Chicago-based Hedge Fund Research started compiling figures in 1990, and it predicted worse to come. The industry lost another $115bn through poor performance, leaving total assets down 9% at $1,560bn. Investors and managers said redemptions would be far bigger at the end of the year because many funds had long notice periods and only allowed quarterly withdrawals. However, many of the biggest hedge funds are now sitting on cash piles of as much as half their assets, leaving them with a big cushions against year-end withdrawals and limiting future sell-offs by the industry. Many investors in the industry argue that hedge fund performance – down 16% this year, its worst yet – should improve as the amount of money in the industry drops.

This entry was posted by Gwen Robinson on Friday, November 21st, 2008 at 5:39 and is filed under Capital markets, Hedge funds. Edit this entry.