Benzinga's Daily Hedge Fund Briefing - January 20: Funds Hold Investors ‘Hostage’ After Excellent Performance

Hedge funds performed significantly better than equities indexes in the last decade and did so with less volatility, Hennessee Group LLC said. The industry snapped back sharply in 2009 after weathering the worst year on record in 2008. Still, a number of funds remain vulnerable, according to a report last week by executive recruiting firm Heidrick & Struggles, which could hurt retention of top talent.

Tuesday, Hennessee Group said its hedge-fund index rose 88% from 2000 through 2009, compared with a 9.3% decline in the Dow Jones Industrial Average, a 23% fall in the Standard & Poor's 500-stock index and a 44% plunge in the Nasdaq Composite. Source

Hedge-fund assets grew by $4.6 billion in December in the eighth straight month of capital growth as investor confidence recovers along with global markets, according to Eurekahedge Pte.

Net inflows totaled $600 million in December, while performance-based gains were $4 billion, the Singapore-based research firm said in a report. Assets under management totaled $1.48 trillion at year’s end, it said. Hedge funds (NYSE:QAI) recovered from their record losses in 2008 as stimulus packages by governments around the globe helped stock and bond markets rebound.Source

Hedge funds in Asia, excluding Japan, were up 37.4% in 2009, outperforming all other regional hedge-fund indexes last year, data provider and research house Eurekahedge said in its latest report.

Despite a rocky start, 2009 was a good year for hedge-fund performance in general, with all funds up an average of 19.4%, according to Eurekahedge. Total global hedge fund assets--including inflows and peformance-based growth--grew by US$4.6 billion in December, bringing total industry assets to US$1.48 trillion. In December, North American hedge funds attracted about US$500 million through net subscriptions and Asia ex-Japan funds attracted US$400 million. Source

However, hedge funds’ best year in a decade is giving little comfort to Jason D. Papastavrou. The founder of New York-based ARIS Capital Management LLC, which has about $250 million invested in hedge funds, is still waiting to get back $155 million from 22 managers that restricted withdrawals in 2008.

“We don’t object to the illiquidity,” Papastavrou said in an interview. “We object to how some managers are abusing the situation and holding investors’ money hostage to generate fees.”Source