Hedge fund investors want out sooner, not later

By Svea Herbst-Bayliss - Analysis

BOSTON (Reuters) - Worried about hedge funds' low returns and high fees, more well-heeled investors are now talking about getting out of these loosely regulated portfolios than getting into them.

Hundreds of investors have asked for their money back at the end of the month, their lawyers and investment advisors said, noting that June 30 could become a watershed date for the $2 trillion hedge fund industry this year.

"If your hedge fund is in the dog house, you typically give the manager until June, and if you are still not satisfied you get out," said Charles Gradante, who counsels clients on hedge fund investments as a principal at the Hennessee Group.

"June redemptions are for people who were on the fence about their managers," he said.

And this year there seem to be plenty of those.

Even though the average hedge fund is up a smidgen this year and most global stock indices are down, wealthy investors and chief investment officers at pension funds and endowments are still digesting the industry's terrible start to 2008.

RATTLED BY LOSSES

Rattled by news that the average hedge fund lost 3.6 percent in January, the industry's biggest-ever monthly loss, many pension fund trustees began to get nervous and pester their chief investment officers to ask about getting out.