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Hedge fund industry showing signs of stabilisation, says IAM

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The hedge fund industry is showing signs of stabilization with a continued reduction in redemption rates and positive performance, according to International Asset Management.

The hedge fund industry is showing signs of stabilization with a continued reduction in redemption rates and positive performance, according to International Asset Management.

Morten Spenner (pictured), chief executive of IAM, says various hedge fund indices are broadly positive year to date – with the exception of CTAs – and are outperforming global equity indices.

Selling pressure from funds of hedge funds is abating due to FoHF closure, better access to credit lines, improving cash flow from underlying investment redemptions and less pressure to sell most liquid assets.

Spenner says the closure of bank proprietary trading desks, hedge funds and other market participants has meant there are fewer risk takers present. Counter-party risk is also under high scrutiny with increased diversification of this risk.

He says strategies that benefit from a simple approach will have the greatest opportunities going forward, including equity long/short, trading, event driven and credit arbitrage, while illiquid and complex strategies are out of favour.

Relative value strategies for small funds (less than USD1bn) will be problematic, as prime brokers will offer less attractive credit lines, Spenner adds.

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