Investors in hedge fund private partnerships are reallocating assets away from the large macro-style managers in the wake of losses in macro funds this year, said E. Lee Hennessee, senior vice president, Hedge Fund Select, a unit of Republic New York Securities, New York.
Year-to-date through August, macro funds were down 16.75%, compared with a return of 1.64% for Hedge Fund Select's universe of hedge funds.
"They're not leaving in droves," but investors are shifting part of their assets with large macro funds into smaller hedge funds to increase diversification, Ms. Hennessee said. Following long periods of high returns, macro funds had become too large a portion of some investors' portfolios, greater than 25% in some cases, Ms. Hennessee said. Now that trend is reversing.
For example, clients of Hedge Fund Select "tended to not prefer short-only managers," but now are taking a look at increasing their allocation to the short side of the market, she said. Some clients also are seeking out specialty managers in international small-cap securities, she added.
