Some hedge funds long closed to new investment have thrown their doors wide open, seeking new cash in order to keep the lights on.
In the face of their worst collective performance in years — compounded by a 76% drop in net inflows in the first half of the year and redemptions from high-net-worth investors — hedge fund managers anxious to replenish their coffers are visiting institutional investors and their proxies, institutionally oriented fund-of-funds managers, with caps in hands, sources said.
Even managers who performed better during the past year of turbulent markets are seeking new investor capital to take advantage of abundant investment opportunities they anticipate in coming months. Sources said managers of global macro, fixed-income arbitrage and multistrategy hedge funds have been especially active fundraisers in recent months.
But whether from desperation or opportunity, most hedge fund managers and strategies are open, some for the first time in years.
Brevan Howard Asset Management LLC, Caxton Associates LLC, D.E. Shaw & Co., Och-Ziff Capital Management Group LLC, Farallon Capital Management LLC, London Diversified Fund Management LLP and Capula Investment Management LLP are among the highly sought-after hedge funds that have been closed or have tightly limited new investment that are now reportedly accepting new capital into their hedge funds.
“Hedge fund capacity is at an all-time high. ... Hedge fund managers have the best investment opportunities they've had for years,” said David E. Gold, manager research consultant in Watson Wyatt Worldwide's New York office.
Hedge fund-of-funds managers, who keep a close watch on available capacity, broadly agreed that 50% or more of hedge funds that historically have been closed or kept a very tight lid on new investment now are fundraising.
“Hedge funds that are tightly closed to new investments definitely are in the minority now,” said Deepak Gurnani, managing director and co-head of the approximately $7 billion hedge fund and fund-of-funds business of Investcorp International Inc., New York.