By Tom Burroughes
LONDON (Reuters) - Hedge fund returns have hit speed-bumps in recent years, but the sector cannot blame a mass inflow of money from institutions for causing weak performance, a senior HSBC executive said on Wednesday.
Hedge funds, which have assets estimated between $1 trillion and $1.5 trillion, have returned less than the stock markets in recent years.
Some commentators say big inflows from institutions into hedge funds are crowding the market, but that is unlikely to be the main force at work, Bill Maldonado, chief executive officer, alternative investments, HSBC Halbis Partners (UK), told the Reuters Hedge Funds and Private Equity Summit.
"What we read about in the mainstream press is that hedge fund returns have been compressed by the huge volume of money into hedge funds ... Broadly speaking, that isn't true."
Low market volatility, a relatively calm global economic environment and low interest rates have removed some of the opportunities hedge funds typically need to make money, he said.
"All of these things have had an important bearing on the Alpha (market-beating returns) that hedge funds can generate."
However, some specific hedge fund strategies have been squeezed by the weight of client money, he said.
For example, merger arbitrage funds that trade shares of firms in takeover battles have seen returns fade in the face of high inflows. Continued...
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