Hedge Fund Reader : Investors want shorter lockup periods for hedge funds

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July 24, 2005

Investors want shorter lockup periods for hedge funds

More and more hedge fund investors are interested in investing for smaller durations. They are looking for investment lockup of one year or less. This trend was more than evident in a survey conducted by Deutsche Bank. The survey interviewed around 1000 investors and the findings suggest that the number of such investors has gone up from 68% last year to 77% this year. Nationality also gives a skew to the figures, with 90% Europeans asking for shorter lockup duration as compared to 68% Europeans. The need for shorter duration lockups also seems to be universal with almost everybody from - fund of funds and high net-worth individuals and family offices to pensions, banks, and corporations to insurance companies – asking for it. Lockup periods are very critical for the fund managers of hedge funds. It offers the much needed stability to the fund especially during rough weather such as that experienced in the first half of 2005. One would remember how the downgrades of General Motors and Ford Motor earlier this year rocked the bond market leading to a trail of redemptions from many hedge funds. Apart from this investors are also demanding separate accounts within the funds in which they invest, Deutsche Bank survey reveals. Forbes.com reports:

“Deutsche Bank found in its fourth annual survey of alternative investments that the demand for shorter lockups cuts across all investor classes, from fund of funds and high net-worth individuals and family offices to pensions, banks, corporations and insurance companies.”