Hedge Fund Industry Lost $100 Billion In Assets in October

The hedge fund industry suffered on two fronts in October.

Not only did the hedge fund industry turn in one of its worst one-month performances ever, but it also buckled under a wave of investor redemption requests.

Eurekahedge.com estimates that a staggering $60 billion dollars was withdrawn from the hedge fund industry in October. This is a large hit to the battered and beaten $1.7 trillion dollar industry, and very likely the sign of things to come.

There will be more redemption requests as investors (including pension funds, high net-worth individuals and "fund of funds") scramble to try and withdraw their money. The hedge fund industry has taken a savage beating over the past 12 months in terms of its overall reputation - there was a time when people were lining up to invest in hedge funds, and now they can't seem to get their money out of the industry fast enough.

Funds that have temporarily frozen investor withdrawals will eventually have to start honoring these requests, and this will lead to more fund outflows.

When you add the $60 billion dollars in investor withdrawals to the negative performance that the industry endured in October, you have a loss of $100 billion dollars in total assets in October for the hedge fund industry. This is a massive hit - a hit that will end up ruining many hedge funds, both big and small.

Some are speculating that as many as 50% of the total hedge funds in existence right now won't survive this crippling global market meltdown. Given the exodus of capital and overall lack of confidence in the industry, this wouldn't be at all surprising. Many of the "titans" of the industry are putting together horrible years that they will never be able to recover from.

The hedge fund world is extremely lucrative, but also very cutthroat. You can be on top of the industry one year and gone the next. A 30-40% one-year decline is nearly impossible to come back from in the hedge fund industry.

Expect these redemption requests to continue as investors leave the industry en masse.

Filed under: Hedge Fund News | The Economic Meltdown