Market watchers said it would happen and now it appears it has: Demand for investing in companies that invest in hedge funds has slackened, apparently as a result of the $6.4 billion in losses by Amaranth Advisors. Proof comes in the form of some recent fund of hedge fund behavior. According to Dow Jones Newswires, the newly formed company launched by Collins Stewart Tullet formed to invest in FoHFs, has delayed its initial public offering, while another FoHF company based in London and advised by Thames River Capital, Thames River Multi Hedge PCC, barely raised little more than 10% of it £150 million target. Tapestry Investment, whose shares in Amaranth lost 6.75% of their value, has shelved indefinitely its plan for offering additional share classes. “The blowup of Amaranth caused a considerable knee-jerk reaction of less demands for funds of hedge funds,” said Ed Morse of Thames River. The slowdown, however, may not just be as a result of the Amaranth effect, although it has made investors more careful about where and with whom they put their money. It may also be the natural course of event. “It’s probably time to stop and draw breath, given that recent launches have absorbed quite a lot of capital,” one sales head in London told DJN.
