21/07/2010 Author: Zaki Abushal

FoHFs unfazed by hedge fund cash levels 

Fund of hedge funds (FoHFs) are holding steady, even as hedge fund managers rein in their gross exposure. The view of a leading FoHF manager who talked to HFMWeek was one of stolid pragmatism, as the industry responds to the ebb and flow of the market. “Cash levels are normal across the fund range, although emerging markets is perhaps a little higher than usual, but not surprising given the market conditions,” said the manager.

Pauline Modjeski, president at Horizon Cash Management, sees very little difference in FoHF demands, with no out-of-the-ordinary build up in cash positions.

Boris Arabadjiev, CIO at Credit Suisse's FoHF group, regards any increase in cash positions as a reflection of potential redemptions, and little to do with perceived risk in the market place, saying claims that cash levels among hedge funds are as high as 60%, or even 80%, are unfounded.

Gross exposure among hedge funds has come down, according to Arabadjiev. “On average, long/short equity gross exposure was up around 200% pre-crisis and is now down closer to 160%,” he said.