Hedge funds' assets off $210 billion in third quarter
Poor returns spur record $31 billion redemptions, industry researcher says
Hedge funds oversaw $1.72 trillion at the end of September, down from $1.93 trillion at the end of the second quarter, Hedge Fund Research said. That's the largest quarterly decline on record, according to the firm.
Net capital redemptions totaled $31 billion in the quarter, also a record, the firm added.
Withdrawals came during a period of dismal performance for the funds. Hedge Fund Research's main index lost nearly 8.9% in the third quarter, leaving it down more than 10% so far this year.
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Hedge fund investors redeemed at least $43 billion in September as they reacted to the industry's worst year for performance in at least a decade, TrimTabs reported.
Forced hedge fund selling may be over: TrimTabs
But huge mutual fund redemptions may mean stock market hasn't bottomed
If hedge funds have already raised enough cash, that could reduce some of the pressure on these types of shares. However, the overall stock market may be already suffering from a new source of selling, TrimTabs added.
Mutual funds have been getting roughly $5 billion a day in redemptions in October because retail investors are spooked by the financial crisis, Biderman said.
Several times this month the stock market has slumped sharply during the final hour of trading. That may be because mutual fund managers are getting a summary of redemptions each afternoon and have to sell quickly to return investors' money by the next morning, Biderman explained.
"The problem with the market is not hedge funds anymore," he added. "Forced liquidations appear to be coming from mutual funds."
When forced selling by mutual funds stops, that may help the stock market stabilize. But such liquidations could last through the end of this year, partly because people may redeem losing mutual fund investments for tax purposes, Biderman explained. End of Story
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