TrimTabs: Hedge Fund Redemption Cycle Just Beginning

Investors pulled $43 billion out of hedge funds in September, in what could be the start of a “death march,” the FT reports:

The data from TrimTabs Investment Research - which was to be sent to clients late yesterday - come as hedge funds are working to prevent far bigger redemptions by the end of the year, when many funds give investors a chance to take out money.

Withdrawals can lead to a vicious circle in the markets, as funds sell holdings to return money to clients, depressing prices and prompting further redemptions.

A fundraiser for a major hedge fund said the period "between now and December 1 is a sort of death march" for the industry. . .

Conrad Gunn, chief operating officer of TrimTabs, said the $43bn in September withdrawals would mark "the beginning of what we expect to be a series of outflows for the remainder of the year. We expect October outflows to be larger". [Emph. added]

Bonus confidence-booster!: The FT also notes an estimate by J.P. Morgan that, because of hedge funds’ leverage, every $150 in redemptions translates into $400 worth of portfolio liquidation. December 1 can’t come fast enough. . .  .

Comments

[formerhawk:]

And what happens to that money? At these levels it may march right back in, with other managers of course.

2008 Oct 17 08:57 AM

[OldLimey:]

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Steady on guys. Don't crash their server."

2008 Oct 17 01:22 PM