Thursday, October 16, 2008

$43 billion yanked from hedge funds

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...

The chief executive of a leading alternative investment manager said he expected the hedge fund industry to shrink by 50 per cent in coming months – with half the decline coming from withdrawals and half coming from investment losses.

Secretary of the Treasury Paulson said that he wanted to get the "bad hedge funds" when he was having dinner with Dick Fuld in April. It wasn't the bad hedge funds that blew up the system, but Dick Fuld's bad Investment Bank.

But now in this market, every fund is the good, the bad, and the ugly!

Here's the link to the redacted email from Fuld, where he summarizes his dinner with Paulson.

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