By Michelle Celarier
The financial crisis of 2008 cast a long shadow over hedge funds. Even though performance has bounced back this year—in some strategies dramatically so—the industry remains in the midst of a profound transformation.
Two surveys in this inaugural issue of AR, the magazine created by the combination of Absolute Return and Alpha, speak to the changes: the first AR Hedge Fund Report Card and the semiannual Absolute Return Billion Dollar Club.
The Billion Dollar Club, a ranking of every American hedge fund with more than $1 billion in assets, confirms that the total number of such firms and the assets they manage is lower still than it was in January, an indication that the industry is not quite through the pain that began last year. One reason for the shortfall: Redemption requests continued through March, in what some refer to as the Madoff effect.
Yet a number of big funds—such as those run by Highbridge Capital Management, a unit of the second largest firm in our ranking and the subject of our cover story—have rebounded sharply. Through July, Highbridge’s flagship multistrategy fund had gained as much as it lost last year (27%). But Highbridge’s assets still only show a modest increase. Why? It has used this year’s profits to release some of the money gated last year.
Gates and halted redemptions burned investors last year, which brings me to the second survey in this issue—our premier Hedge Fund Report Card. We’ve asked investors to rank hedge funds on the issues that have become paramount to them. After last year, is it surprising that “alignment of interests” is the top-rated concern of investors? The report card itself speaks directly to the changing power dynamics between managers and their investors.
Both Absolute Return and Alpha were launched in 2003, just as the hedge fund boom was getting under way, and both magazines covered the era with insight and flair. We promise to do the same in the new, more sober environment. We will continue to be the thought leader for the industry, as we document the ongoing transformation of hedge funds-especially their relationships with investors.
As always, we’ll be asking the tough questions and providing details on the industry you can’t get anywhere else. This month’s exclusive profile of Calpers, California’s public pension fund, is an example of the type of stories you can expect from AR. No other institutional investor has as much clout as Calpers, and the pension fund is trying to use its power to help level the playing field for investors.
Readers of both Absolute Return and Alpha will find all the features of the legacy publications, in a sophisticated new design that we think you’ll appreciate. The U.S. League Tables from Absolute Return are now available only on our new website: institutionalinvestor.com. Be sure to check out the site not just for the league tables, but for breaking news, blogs and other exclusives throughout the month.
We’re also introducing new features, including the Niche Player, which will look at smaller funds—those around $1 billion or less—that we think are likely to be the stars of the future. And we are starting a new feature called In Depth, which will tackle the big issues of the day.
Welcome to the new era—and the new AR.
