It appears that one potential opportunity has presented itself as a result of the ongoing credit crisis. Many larger investors investors who qualify for hedge fund investment, but who have previously been shut out due to their fund of choice being closed, may now have their opening (see Reuters article).
Mass redemption are causing funds that previously closed their doors to open them back up. Of course, for many hedge funds this would still require you to have up to half a million dollars, and also nerves of steel given the daily developments in the market.
While at a loss, hedge funds on average are still "only" down 9.41 percent, compared to the 30 percent drop in the DJIA over the same time frame. Yet a loss is a loss. Of course, even if you feel that the market has bottomed and decide to park your money in a hedge fund, the fund may not put your funds to work right away given that money is still being kept on the sidelines in order to deal with future redemption.
Furthermore, while long-term investors should be rewarded, there is always a worry that hedge funds that continue to see larger losses and redemption may also force them to close up shop and start new if current performance takes them too far away from any internal high water marks that are necessary to once again start taking performance fees.
While the dawn does come after the darkest part of the day, it may unfortunately still be too soon to know how late it is in the evening.
