By Daisy Ku and Laurence Fletcher
LONDON (Reuters) - Traditional long-only mutual funds are set to dominate shareholder registers again as the hedge fund industry shrinks and retail investors continue to stay away, according to Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).
Meanwhile, with institutions, including hedge funds, deleveraging aggressively, emerging markets equity issuance is set to fall to 10 percent of total volume in Europe, Middle East and Africa in 2009 from one quarter this year, the bank told the Reuters Global Finance Summit.
"Traditional classic long-only funds, which used to be the main part of shareholder registrar in the 1990s, will become more important," said Emmanuel Gueroult, head of EMEA equity capital markets.
"The hedge fund industry is deleveraging...Access to credit is difficult."
The once red-hot hedge fund industry, which were among the most active players in convertible bonds, initial public offerings and secondary issuances, saw assets under management shrink to $1.72 trillion from $1.93 trillion during the third quarter as investors pulled out a record $31 billion, according to Hedge Fund Research.
The end of the year could see even greater redemptions -- between a quarter and a third at the end of the year-end, according to Peter Clarke, chief executive of Man Group (EMG.L: Quote, Profile, Research, Stock Buzz).
The financial crisis also means European investors are becoming more domestically driven.
"The power of U.S. investors will become more important. Its relative gain versus Europe is even more pronounced now than it was six or five months ago - because the asset management industry, except for the UK, is limited to very few names," said Gueroult.
The changes of investor mix is unlikely to help emerging market issuances.
"This year, up until September, was extraordinary from the emerging markets point of view," said Gueroult.
According to Thomson Reuters data, emerging markets in the EMEA region raised a combined $52 billion so far this year, down 37 percent from 2007's $82 billion.
"Russia and the Middle East were two main drivers of growth. But some of these countries were heavily dependent on what happens to commodities. I think there will be some adjustment," Gueroult added.
"Perception very quickly turns into reality. What investors tend to do, is to act upon that suspicion very very quickly, by their actions they turn their concern into reality," said William Chalmers, head of European banks within the financial institutions group.
"What they thought was risk then becomes reality, which lead to overshoot," he said.
(For summit blog: summitnotebook.reuters.com/)
(Editing by Douwe Miedema and David Cowell)
© Thomson Reuters 2009. All rights reserved.
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
| Washington | Oct 19 - 21, 2009 | Country Summits |
| Global Wealth Management | Oct 05 - 7, 2009 | Financial Services / Exchanges |
| Restructuring | Sep 29 - Oct 01, 2009 | Financial Services / Exchanges |
