Market Turbulence Impacting Investors Globally

Market turbulence, described by many as 'unprecedented,' is impacting all types of investment around the world. The lack of liquidity in financial establishments paired with diminishing private capital is impacting interest in everything from private equity funds to pension plans to fund of hedge funds. Emerging markets are among the worst performing.

Figures recently released by BNY Mellon Asset Servicing shows pooled UK fund of hedge funds achieved a median return of -9.7% for 3Q08, compared to a median fund return in 2Q08 of 2.4%. This, however, still outperformed property pooled funds which had a median return of only -17.3% throughout the same period.

Meanwhile, in New Zealand, the Central Capital Regional Fund is delaying the launch of its private equity fund as a direct result of plummeting investor confidence. The global financial crisis has reportedly impacted investor confidence to such a degree that the fund is being delayed until at least next year. First introduced in August of 2008, the fund was being implemented to raise $50 million within 12 months and provide equity capital to provincial North Island growth companies. With the current climate and deteriorating economic conditions, which have led potential investors to delay or reduce commitments to the fund, Central Capital is now contacting all committed investors to advise these developments.

Hennessee Group hedge fund adviser has announced its hedge fund index declined –5.52% in October, -15.30% YTD. In addition to this, the hedge fund adviser reported its Long/Short Equity Index declined –5.49% in October (-14.31% YTD), defensively positioning managers with significantly reduced exposures and significant losses in equity markets, its Arbitrage/Event Driven Index declined –4.70% for the month (-13.45% YTD) and its Merger Arbitrage Index declined –0.18 % in October (-0.86% YTD). In a global context, the Hennessee Global/Macro Index declined –5.48% in October (-17.68% YTD) while international equities continued a steep decline of -20.24% (-45.02% YTD) thanks in part to de-leveraging.

Emerging market equity, simultaneously, has declined -20.3% for 3Q08 demonstrating investors are steering clear of riskier investment. The limited number of funds in which investors are interested are more established with over $500 million under management and a more established track record of more than 5 years. Demonstrating more investor interest than hedge funds altogether, however, are such investment vehicles as bonds, property and cash.

BNY Mellon Asset fund of hedge funds covers 16 separate funds with over EUR7.8 billion in assets while the Bank of New York Mellon Corporation (BK) financial services company is present in 34 countries and over 100 markets. The bank has US$22.4 trillion in assets under custody and administration, approximately US$1.1 trillion in assets under management and services approximately US$12 trillion in outstanding debt.