Could it be that the criticism leveled against hedge funds as “locusts” has bugged investors to the point of driving them away from the industry? Or, perhaps local hedgies haven’t developed the knack yet to be savvy managers. Whatever the reason, Germany’s hedge fund industry is failing to thrive, both in asset growth and in performance. Financial Times Deutschland has found that with few exceptions, the average yield of hedge funds in the country is a meager 3%, far behind the global average of 7%, and not much better than what traditional fixed-income investments produce. What’s more, according to FTD, more than 20% of the country’s 18 hedge funds have seen red through September, and the sector as a whole cannot seem to attract fresh assets. While hedge funds in hotter markets are seeing AUM soar, the Germany HF industry added only €550 million (US$692.5 million) so far this year to its $2.5 billion (US$3.1 billion). “We are limping behind the international trend, according to the Bundesverband Alternative Investments, a HF umbrella group. “Especially the larger funds abroad have performed way better.” Also doing better in attracting assets is private equity, which is finding new converts among institutional investors. Meanwhile, not helping situations for hedge funds in Germany and elsewhere around Europe, Jean-Claude Trichet, president of the European Central Bank, suggested hedge funds may face tougher regulation, suggesting that upon further review of the industry after a lawmaker from The Netherlands said hedge funds were a regulatory “black hole.” Further analysis, said Trichet may make “a real case for enhancing the present framework.”
