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Hedge Funds

Even strong hedge funds may go under

Even some strong hedge fund managers may not survive the ongoing credit crisis due to a lack of funding or credit, the president of hedge fund John W. Henry & Co. said on Tuesday. REUTERS/Suzanne Plunkett

NEW YORK (Reuters) -Even some strong hedge fund managers may not survive the ongoing credit crisis due to a lack of funding or credit, the president of hedge fund John W. Henry & Co. said on Tuesday.

“There are going to be some firms that have good strategies that were strong in terms of discipline and their strategy itself, but may not survive this because they don’t have the assets or the funding to be able to survive,” Ken Webster, president of the firm, said at the Reuters Investment Summit in New York.

The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades.

In the first 10 months of the year, hedge fund losses have reached more than 16 percent, according to data released by Hedge Fund Research.

Investors withdrew over $40 billion (27 billion pounds) from hedge funds in October, while assets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of the fourth quarter of 2006.

“There are a lot managers that are going out of business that have underlying positions that are profitable” because they can’t get the financing as a result of the credit crisis, Webster said.

He said many hedge funds, struggling to hold on to capital, have become more open to offering lower fees and packages to attract clients to extend their stay.

“I think you’re going to see what we’re all seeing now, which is continued shake-up in the hedge fund industry,” he said. “There’ll be a lot of external pressures on strategy that may force people out of the market. Overall, their strategy was working, but not in an environment like this.”

Editing by Leslie Adler

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