A return to the sticky money

As we get closer to the end of the year, it is interesting to see where the flows are heading.

September saw plenty of activity in the private equity space.  Not necessarily in terms of the big buck exits, or even performance stats, instead it has been sizeable fund raisings, with some chunky dollar numbers announced. Impressive in a world where the cost of the funding has become more expensive.

These have come from the likes of Clayton Dubilier & Rice, Baring Private Equity Asia, Bessemer Venture Partners and BayPine, to name just a few. 

It was rather more nuanced in the hedge fund world, which is judged by monthly performance numbers. Particularly hard hit have been long-biased equity managers - not just those with tech exposure - although on the other side are many of the macro and CTA players that have continued to outperform, profiting from rate rises, currency moves and commodity market flows. 

Perhaps, not surprisingly, the more short-biased equity managers, have also been performing well and recently we have seen them increasingly focus in on Europe and in particular the UK.  

We are seeing an up-tick in hedge fund manager redemptions, although so far there has not been a rush for the door. This may change and from a manager’s perspective it is a reminder of why they prefer sticky money, rather than being beholden to investor liquidity requirements.

Back in 2008, managers with monthly or quarterly redemptions looked on enviously at private equity and those hedge funds with longer lock-ups as investors turned to them as ATMs. Some of the ‘brand’ funds have already returned to longer lock-ups, big enough to go against the daily liquidity tide, and will be delighted to have made that move. 

With global economies looking firmly in the mire and with further aggressive rate rises to come, we all need to keep our heads down and listening to managers, it is more than just investing around rate rises and looking for specific trends, it is also about hedging portfolios for what many see as a prolonged slowdown.