Hedge Fund Industry Faces Avalanche Of Redemptions

Oct 1 2008 | 9:01am ET

Was yesterday Black Tuesday for the hedge fund industry?

Hedge funds, battered by the credit crisis and market volatility, were expecting a huge number of redemption requests yesterday from investors eager to get their capital out of money-losing hedge funds that require 90 days notice for withdrawals. Hedge funds around the world have been selling positions and building up cash for the eventuality.

“If managers anticipate the amount of redemptions correctly, it won’t be a problem,” Sol Waksman, president of research firm BarclayHedge, told MarketWatch. “But a lot depends on performance in the last quarter.”

Hedge funds are reportedly holding their highest cash positions in history in anticipation of an avalanche of redemption requests.

Hedge funds focused on Asia are thought to be particularly vulnerable to investors flooding the exits, but if the redemptions are larger than expected, it could cause a sell-off driving down stock prices around the world.

Meanwhile, one former British regulator says the number of hedge funds considering liquidation is also on the rise.

“We are being approached by hedge funds considering voluntary fund liquidations on a weekly basis,” Andrew Shrimpton, formerly head of hedge fund regulation at the Financial Services Authority, told The Times of London. Shrimpton now runs the consultancy Kinetic.


In Depth

FINalternatives Survey: We Asked Investment Pros...

Apr 2 2016 | 9:42pm ET

The data from our annual reader survey continues to roll in and provide interesting...

Lifestyle

Point72's Cohen Donates $275M To Veterans Mental Health Network

Apr 6 2016 | 8:31pm ET

Billionaire hedge fund manager Steve Cohen has formed a non-profit aimed at treating...

Guest Contributor

Agecroft: Why NYCERS Should Reconsider Exiting All Hedge Funds

Apr 18 2016 | 5:51pm ET

The recent decision by the New York City Employment Retirement System to exit its...