Hedge fund redemptions this year may not be as great as some fear, if investor response to market turmoil in 1994 is any indication, according to a survey.
Close to 96% of respondents to a survey by Hennessee Hedge Fund Group, New York, said they did not reduce hedge fund investments after the funds took a hit in 1994.
None of the endowment and foundation executives in the survey reduced their allocation to hedge funds in 1994, when rising interest rates clobbered markets and managers, according to the survey, which was taken before this year's market turmoil and the near-collapse of Long-Term Capital Management. Using statistical methods, Hennessee sent the survey to 2,000 endowments, foundations, high-net-worth individuals, family offices and other investors, and got more than 100 responses.
There is a caveat. E. Lee Hennessee, managing principal, noted the questionnaires were sent to larger investors, which are least likely to flee an investment quickly. "Mature investors" won't leave hedge funds right away, Ms. Hennessee said. They'll take a serious look at the fund's results for this year in the first quarter, and maybe take action at that time. "(Small) investors and new investors are high-tailing it out," she said.
The survey also indicates that even before this summer's shakeout, investors had sought out lower fees, better disclosure, and differently structured compensation fees.
