Hedge funds produced their best returns last year in a decade, but that’s of little solace to the many investors who still can’t pull their money out of them.
Hedge funds lost a record 19 percent in 2008, according to Hedge Fund Research.
And the funds proceeded to lock up investors’ money, because they had some assets they couldn’t sell to generate cash and some they didn’t want to sell.
But the funds gained 20 percent in 2009 and still won’t give the money back, even though they can more easily shed assets now.
Bloomberg cites the example of ARIS Capital Management, which still awaits $155 million from 22 managers that limited withdrawals in 2008.
“We don’t object to the illiquidity,” ARIS founder Jason Papastavrou, told Bloomberg.
“We object to how some managers are abusing the situation and holding investors’ money hostage to generate fees.”
Hedge funds generally charge investors a fee equaling 2 percent of assets.
So fund managers have incentive to discourage withdrawals.
About $77 billion in hedge fund assets frozen during the credit crisis are still trapped, estimates Credit Suisse Tremont.
The caution hedge funds are showing toward returning investors’ money isn’t matched by caution in the funds’ investments.
"In many respects, hedge fund performance in 2009 suggests an aggressive return of risk, essentially the reverse of the financial crisis of 2008," Kenneth Heinz, president of Hedge Fund Research, said in a statement.
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