Hedge Fund Threat to Mutual Funds Comes from an Unexpected Direction
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Friday, January 16, 2009

Hedge Fund Threat to Mutual Funds Comes from an Unexpected Direction

A hedge fund meltdown would be expected to be good news for mutual fund firms seeking to avoid competition, but that may not be so. Instead, hedgers seeking survival are starting to enter mutual funds' own backyard, reports the WSJ Fund Track column.

While the column nominally focuses on AQR Capital Management's preparation to launch a new family of three mutual funds based on its hedge fund investment strategies, it contains a warning.

Jefferies Putnam Lovell analyst Aaron Dorr points out that hedge funds are seeking to diversify their products in order to survive.

According to the WSJ:
AQR's move comes at a time when the hedge-fund industry is grappling with losses and investor redemptions. More hedge funds could follow AQR to gain a foothold in the mutual-fund world, which offers relatively stable assets, albeit with lower fees.
Greenwhich, Connecticut-based AQR -- which is launching a diversified arbitrage fund today and a global and international fund in February -- could be just the first hedger to make the jump. (The launch of AQR's funds was first reported earlier this week: see MFWire, 1/14/2009).

The article makes no mention of AQR's distribution strategies, whether the funds will carry loads or who will be responsible for the mutual fund business.

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