Hedge funds fall victim to success in dash for cash
By Nell Mackenzie
LONDON (Reuters) — The best performing hedge funds are falling victim to their own success as institutional investors such as pension funds and university endowments cut back their most profitable positions to make up for pain elsewhere.
Investors yanked $38 billion from top performing hedge funds in the 12 months to end-October, having pulled out $14 billion in the year earlier period, data from hedge fund specialist Aurum Research shows. These hedge funds returned, on average, more than 19% and 18%, respectively, in the two 12-month periods, Aurum Research said.
While it's not unusual to ditch low performing hedge funds and redeem profits seasonally, the current exodus is being driven by pension funds and universities sacrificing their strongest investments to hold on to private equity and venture capital portfolios that now cost more than they yield, more than a dozen people familiar with these deliberations say.
To avoid selling these investments at a likely loss, institutions would prefer to maintain them in the hope they regain value someday, the sources said.
The trend is set to continue into 2024, said the sources, which include family offices, fund of funds, board and trustee members of pensions and university endowments as well as private banks advising institutions and sovereign wealth funds, overseeing a combined trillions of dollars of assets.
No one wants to sell their private equity holdings and face the discounts likely to be applied in markets, said Michael Oliver Weinberg, who was previously a portfolio manager and board member at Dutch pension fund APG and now teaches at Columbia Business School.
«These pension funds and endowments have been forced to sell what they can, even
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