GLOBAL - Hedge funds have gates on less than 5% of industry assets, down from 35% at the peak of the financial crisis, fund brokers Tullett Prebon said.
The firm said although the $60bn figure (3% of assets) was still large in absolute terms, it was a massive improvement from the height of the crisis and is set to continue to fall this year as money is returned and industry assets grow.
RAB Capital's Special Situations fund will return about $370m after a three-year voluntary lock opens in October, for example, and many other managers pay out investors in liquidating funds.
Neil Campbell, Tullett Prebon's head of alternative investments, said gates opening is "good for the industry and investors, and perhaps good for some managers who may be recipients of that money".
However, David Butler, founding partner of business advisors Kinetic Partners, said the removal of gates on prominent funds would not "truly mark a turning point for the industry, unless there is clear evidence of the alignment of interests of investors and managers."
The locking of cash showed investors allocate to humans, not just impersonal hedge portfolios, said Lisa Fridman, associate director at institutional hedge fund investor PAAMCO.
"Hedge funds are people as well as investment strategies and it is very important to be able to trust those people to treat investors fairly in very unfavourable circumstances," she said. "The experiences bring in datasets for investors to see how managers behave, and whether or not they ‘do the right thing'."
Daniel Mannix, business development head at London manager RWC Partners, which did not gate funds, said: "Ultimately, the only way to protect a fund is to make sure that assets managed and the liquidity you offer match in extreme times. As fiduciary we do not have the right to gate assets, we look after them on behalf of other people. It is about being a fiduciary and being responsible for looking after other people's money, and educating investors how we intend to invest it."
PAAMCO's Fridman added that while investors are evaluating managers' actions, managers are also assessing their investor base.
"It is important for hedge funds as businesses to understand the true investment goals and horizons of their underlying investors. In the past some funds were just happy to raise assets, but now there is more emphasis on the stability of the assets they have raised."
RWC's Mannix said: "It is not just about what type of investors you have, it is about who their underlying clients are, at what point they entered the strategy and what their expectations are." He said, though, investors could not be neatly categorised by the type of vehicle they use or their expected behaviour in crises.
Thomas Deinet from the Hedge Fund Standards Board, says when it comes to impairing assets, "the focus lies on fair treatment of investors".
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