Morgan Stanley equity analysts estimate there will be net hedge fund redemptions of 15% to 30% in the first half of this year, following estimated redemptions of 20% in the second half of last year, which likely will cut total hedge fund industry assets by half – or about $1 trillion — to about $950 billion as of year-end 2009.
Industry assets were at a record $1.93 trillion as of June 30, 2008, according to the Feb. 26 Financials report produced by the Morgan Stanley Research Europe analyst team.
The Morgan Stanley team estimated that European hedge fund and hedge fund-of-fund net redemptions in the second half of 2008 were greater, between 25% and 30%, than the 15%-20% estimate in the U.S.
However, the “U.S. bias to institutions and longer redemption notices means that we expect (redemptions to) catch up in the first quarter of 2009 as institutions and endowments suffering from liquidity mismatch, exacerbated by commitments to private equity and real estate, reduce (hedge fund) allocations,” according to the report.
