Thursday, October 16, 2008

Hedgistan Gears Up For “Death March” as Redemptions Gain Momentum

There was speculation that one cause of yesterday's sell-off was a large hedgie liquidating positions. The action in the formerly high flying groups (ag, solar etc.) lends credence to the idea.
From 1440 Wall Street:
Why have hedge fund legends like Steve Cohen as SAC gone to cash? They have a crystal ball, and can see what is coming....

Investors pulled at least $43bn from US hedge funds in September as market turmoil led to unprecedented withdrawals, an analysis by a leading research house shows.

The data from TrimTabs Investment Research – which was to be sent to clients late on Wednesday – 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.....“Every investor fears other investors will pull their money and so they worry they will be at the back of the line if they don’t also pull,” Mr Freed said. A fundraiser for a major hedge fund said the period “between now and December 1 is a sort of death march” for the industry.

This is not exactly the type of news that will help us find a tradeable bottom....MORE